Blue Chip Issue 90

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.

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.


You also want an ePaper? Increase the reach of your titles

YUMPU automatically turns print PDFs into web optimized ePapers that Google loves.

BLUE<br />

CHIP<br />

0.5 CONTINUOUS<br />



<strong>Issue</strong> <strong>90</strong> • Feb/Mar/Apr 2024<br />

www.bluechipdigital.co.za<br />

0.5 CONTINUOUS<br />






1.5 CONTINUOUS<br />


1.5 CONTINUOUS<br />






The growing threat of<br />


ETFs, ETNs & AMCs<br />

The future of investing?<br />


2023 Financial Planner of the Year<br />



Ferdi van Heerden, CEO for Momentum Investments

Partner with us, become an FPI<br />

Approved Professional Practice TM<br />

FPI Approved Professional Practice TM<br />

firms<br />

For more information, get in touch with us<br />

Email us<br />

businessdevelopment@fpi.co.za<br />

Contact us:<br />

Visit our website<br />

+27 11 470 6000 www.fpi.co.za

Professional Financial Planning and Advice for all<br />

NextGen<br />

FPI is excited to introduce the Next Generation Certification Standards for the<br />

CERTIFIED FINANCIAL PLANNER ® (CFP ® ) designation. The assessment process to<br />

become a CFP ® professional member of FPI will be amended from 1 January 2025 to<br />

align closely with the current international requirements for CFP ® certification.<br />

For more information visit: www.fpi.co.za or email: certification@fpi.co.za



In 2023, the FPI celebrated looking back to where we have been while moving forward<br />

into a future where change is a constant evolution of innovation and progress. And<br />

with 2024 just a month old, it certainly feels like we have made a collective leap<br />

forward into the future.<br />

In today’s fast-paced era, financial advisors require tools that seamlessly adapt to their<br />

evolving needs. Ferdi van Heerden, Momentum Investments’ new CEO, cautions that the<br />

investment industry can no longer ignore technological innovation and to do so would be at<br />

its peril. Van Heerden firmly believes that an AI-driven tech revolution will reset the rules for<br />

investment managers (page 20).<br />

To deal with this AI wave, you need to be strategic. It’s important to organise and optimise<br />

data so that AI can use it. Prepare your data by identifying the 20% that is important for 80%<br />

of the services and tasks you perform and focus on that. And then you need to ensure that<br />

you implement security measures and protocols (page 64).<br />

South Africa has been identified as the fifth-most affected country globally in terms<br />

of cybercrime. Reports indicate a concerning 356% increase in impersonation fraud<br />

between 2022 and 2023. In addition, a cybercrime report by Interpol discovered that<br />

more than 230-million cyber threats were detected in South Africa in 2021. Cybercrime<br />

is more profitable than the global drug trade and costs more per year than all natural<br />

disasters combined (page 50).<br />

Linktank concurs and goes on to say that 95% of the 230-million cyber threats<br />

were email-based attacks. South Africa has had a 100% increase in mobile banking<br />

application fraud and experiences on average 577 malware attacks every hour (page 58).<br />

Trust is the cornerstone of the financial services profession, and social media can<br />

be a powerful tool in building and maintaining this trust. Consistent, transparent<br />

communication that reflects professional ethics and values goes a long way in solidifying<br />

client trust. It’s about creating a digital presence that clients can rely on for accurate, helpful<br />

information (page 18).<br />

Blogs are conduits for conversation and driving connection with your community. They<br />

have the power to elevate your client engagement strategy to new heights, to initiate<br />

dialogues that build trust and foster lasting relationships. If you want to put people first and<br />

bring out the human element in your online communication, blogs can be a powerful way to<br />

achieve this through a scalable, sustainable strategy (page 62).<br />

Back to celebrating Back to the Future, which was the theme of the 2023 FPI Professional’s<br />

Convention. Turn to page 34 for a roundup of the winners from the prestigious FPI gala<br />

awards that recognise excellence in the industry and meet Lara Warburton, 2023 FPI<br />

Financial Planner of the Year (page 30).<br />

May 2024 be a winning year for you!<br />

All the best<br />

Alexis Knipe, Editor<br />

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

blue-chip-journal<br />

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

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

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

industry.<br />

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

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

FPI members are able to earn three verifiable Continuous Professional Development<br />

(CPD) points per edition of the print journal (four per year) under the category of<br />

Professional Reading.<br />

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

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

ISSUE <strong>90</strong> |<br />

FEB/MAR/APR 2024<br />

BLUE<br />

CHIP<br />

Publisher: Chris Whales<br />

Editor: Alexis Knipe<br />

Digital Manager: Kerenza Lunde<br />

Designer: Monique Petersen, Brent Meder<br />

Production: Sharon Angus-Leppan<br />

Ad sales:<br />

Sam Oliver<br />

Gavin van der Merwe<br />

Bayanda Sikiti<br />

Venesia Fowler<br />

Vanessa Wallace<br />

Tahlia Wyngaard<br />

Managing director: Clive During<br />

Administration & accounts:<br />

Charlene Steynberg<br />

Kathy Wootton<br />

Distribution and circulation manager:<br />

Edward MacDonald<br />

Printing: FA Print<br />


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

Company Registration No:<br />

2004/004982/07<br />

Directors: Clive During, Chris Whales<br />

Physical address: 28 Main Road,<br />

Rondebosch 7700<br />

Postal address: PO Box 292,<br />

Newlands 7701<br />

www.bluechipdigital.co.za<br />

Tel: +27 21 657 6200<br />

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

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

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

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

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

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

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

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

advertising. All rights reserved.

Indexation: Anything but Passive.<br />

Indices can be actively designed, like our Factor Range.<br />

Indices can be geographically diversified, like our Global ETF Range.<br />

Indices can be optimally designed like our Multi-Asset Range.<br />

Indices can be designed to target themes, like our Thematic Range.<br />

While indices can take many different forms, all are transparent<br />

and low-cost.<br />

Take control of what you’re investing in by<br />

incorporating indexation into your portfolio.<br />

Contact us to learn more at<br />

institutional@satrix.co.za.<br />

Satrix Investments (Pty) Ltd is an approved financial service provider in terms of the Financial Advisory and Intermediary Services Act, No 37 of 2002 (“FAIS”).<br />

Satrix Managers (RF) (Pty) Ltd (Satrix) is a registered and approved Manager in Collective Investment Schemes in Securities.


ISSUE<br />

<strong>90</strong><br />

FEB/MAR/APR 2024<br />

04<br />

10<br />

12<br />

16<br />


By Alexis Knipe<br />


Message from FPI CEO<br />


Milestones, news and snippets<br />



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

17<br />


Column by Rob Macdonald, Head<br />

of Strategic Advisory Services, Fundhouse<br />

18<br />



Column by Kobus Kleyn, Tax and<br />

Fiduciary, Kainos Wealth<br />

20<br />


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

Heerden, CEO of Momentum Investments<br />

24<br />




Mike Adsetts, CIO, Momentum Investments,<br />

uncovers the strategic partnership that<br />

deepens portfolio integration<br />

25<br />

A GLIMPSE INTO 2024<br />

The top 10 trends shaping<br />

tomorrow<br />

26<br />




Eugene Botha, Deputy Chief Investment<br />

Officer, Momentum Investments, on the<br />

Research Hive, a purposefully created<br />

hub of research and innovation activity at<br />

Momentum Investments<br />

28<br />



By Fränzo Friedrich, Head of Marketing,<br />

Momentum Investments<br />

30<br />

34<br />


Meet Lara Warburton, CFP®, 2023<br />

FPI Financial Planner of the Year<br />


2023 GALA AWARDS<br />

A roundup of the winners from the<br />

prestigious event recognising excellence in<br />

the industry<br />

38<br />



There are several instruments that you can<br />

use to provide an income<br />

41<br />




By Bjorn Ladewig, Head of Distribution,<br />

Just SA<br />

42<br />



Recent developments in the market for<br />

exchange-traded products are providing<br />

access to a whole new world of investment<br />

opportunities for financial advisors<br />

46<br />


<strong>Blue</strong> <strong>Chip</strong> sits down with Michael<br />

Mgwaba, Head of ETP Business at Absa<br />

Corporate and Investment Banking<br />

48<br />



By Kingsley Williams, Chief Investment<br />

Officer, Satrix<br />

50<br />



Greig Phillips, Investment Specialist,<br />

Fundhouse, delves into the intricate world<br />

of cybercrime<br />

6 www.bluechipdigital.co.za


ISSUE<br />

<strong>90</strong><br />

FEB/MAR/APR 2024<br />

54<br />




By Robert Starkey, Portfolio Manager,<br />

Schroders<br />

56<br />




James Corkin, Portfolio Manager, Steyn<br />

Capital Management, attests that the magic<br />

of compounding long-term investment<br />

returns cannot be overstated<br />

58<br />





Advice on solutions to assist in the<br />

mitigation of cybersecurity risks<br />

60<br />



A guide for employee benefit consultants<br />

using cloud computing and AI, by<br />

AgendaWorx<br />

62<br />




Digitalising client engagement and<br />

communication strategies for financial<br />

planners<br />

64<br />




Francois du Toit, CFP®, founder of<br />

PROpulsion on what AI brings to the table<br />

for financial advisors<br />

66<br />



Thinking with clients or for clients by Rob<br />

Macdonald, Head of Strategic Advisory<br />

Services, Fundhouse<br />

68<br />


The power of value-based<br />

conversations, by Kim Potgieter<br />

70<br />




By Sarah Love, CFP®, Fiduciary Practitioner,<br />

Private Client Trust<br />

72<br />



Hannah Wilson, Director, Simplifi Law<br />

outlines the recent changes in divorce law,<br />

74<br />




Alicia Davids, CEO, Asisa Academy, tells us<br />

about the great work that the academy is<br />

doing for IFA graduates<br />

76<br />



ISSUE?<br />

Asks Anton Swanepoel, founder, Trusted<br />

Advisor<br />

79<br />



The FPI introduces the Next Generation<br />

Certification Standards<br />

8 www.bluechipdigital.co.za

Who should apply?<br />

For Financial Advisors who have two (2) years or<br />

more relevant financial services experience. FPI<br />


Designation so that you can differentiate yourself<br />

through the FPI Code of Ethics and Professional<br />

Standards.<br />

The Criteria<br />

This membership type is for a person who<br />

has:<br />

Completed a level NQF6 (old) or NQF7 (new)<br />

qualification;<br />

Has two or more years financial services<br />

experience;<br />

Has completed the professional competency<br />

examination (written or exempt*); and<br />

Has agreed to abide by the FPI Code of<br />

Ethics and Professional Standards.<br />

Exemption* :Honours/ Post Graduate Diploma In Financial Planning ;BCom in Financial Planning; BCom Finance; Certificates in<br />

financial planning & Wealth Management obtained from Milpark Education; Moonstone (MBSE); SANLAM Connect Academy;<br />

Universities- Academia, Free State, Johannesburg, Kwa-Zulu Natal, Stellenbosch, Johannesburg, NNMU.<br />

businessdevelopment@fpi.co.za | +27 11 470 6000 | www.fpi.co.za

BLUE<br />

CHIP<br />

FPI UPDATES | CEO message<br />

Lelané Bezuidenhout, CFP®,<br />

CEO, Financial Planning<br />

Institute of Southern Africa<br />

Looking ahead<br />

to 2024<br />

The CEO of Financial Planning Institute of<br />

Southern Africa shares FPI’s latest news.<br />

Greetings and a warm welcome to this edition of <strong>Blue</strong><br />

<strong>Chip</strong> magazine! We are grateful to have the support<br />

of an established publication like <strong>Blue</strong> <strong>Chip</strong> dedicated<br />

to supporting the financial planning profession and<br />

delivering the latest insights from the industry. Thank you for being<br />

part of this exciting journey with us!<br />

Global update<br />

It is with gratitude that I reflect on the achievements and<br />

significant moments that shaped the Financial Planning Institute<br />

(FPI) in Q4 of 2023.<br />

In October, FPI chairperson, Kirsty Scully, CFP®, and I had<br />

the honour of representing the FPI on the international stage,<br />

joining over 20 Financial Planning Standard Board (FPSB)<br />

affiliates in Singapore. This marked a key moment as we<br />

immersed ourselves in the global financial planning community<br />

at the Financial Planning Association of Singapore (FPAS) global<br />

conference. It was a joyous occasion as we celebrated the 25th<br />

anniversary of CFP certification in Singapore, mirroring FPI’s<br />

own milestone in South Africa.<br />

During this international gathering, FPSB introduced the<br />

Outstanding Contribution to the Profession Award, a global<br />

accolade recognising those who have made indelible contributions<br />

to the financial planning profession. We are delighted to announce<br />

that the inaugural recipient of this prestigious award is the former<br />

FPSB CEO, Noel Maye. We extend our heartfelt congratulations to<br />

Noel on this well-deserved recognition.<br />

In the spirit of global collaboration, we extend a warm welcome<br />

to FPSB Italia as an Associate of our global network. Our time in<br />

Singapore also provided a platform for engaging in discussions on<br />

crucial global matters such as digital assets, ESG and AI, signalling<br />

the evolution and adaptability of our profession.<br />

Local update<br />

Shifting our focus back to South Africa, the #2023 FPI Professional’s<br />

Convention, Back to the Future, took centre stage. With close to 800<br />

online attendees and approximately 400 in-person participants,<br />

the convention was a testament to the unwavering support of<br />

our community of expert financial planning professionals. We<br />

express our sincere gratitude for your commitment and active<br />

participation, making it a humbling and gratifying experience.<br />

Special thanks to the exhibitors, especially <strong>Blue</strong> <strong>Chip</strong>, who joined<br />

us in making this year’s convention a success. Visit our website to<br />

see some of the highlights of this year’s convention.<br />

An unforgettable moment during the convention was the<br />

presence of Dante de Gori, CFP® and CEO of the Financial Planning<br />

Standards Board (FPSB). During Dante’s visit, we were fortunate<br />

enough to interview him about the FPSB's identity and his vision<br />

for the financial planning profession, the recording of this interview<br />

is available on FPI’s YouTube channel.<br />

Then, the 2024 FPI Professional’s Convention will be in August<br />

in Cape Town! We cannot wait to connect with you in the Mother<br />

City. More details to follow soon.<br />

2023 Award winners<br />

The highlight of the 2023 FPI Professional’s Convention was the<br />

truly classical gala awards evening, where we celebrated excellence<br />

in the financial planning profession.<br />

On 14 November 2023, Lara Warburton, CFP®, was announced<br />

as the distinguished recipient of the FPI Financial Planner of the<br />

Year Award.<br />

In addition to Lara’s achievement, the evening celebrated other<br />

noteworthy winners:<br />

• FPI Approved Professional Practice of the Year: Crue Invest<br />

• Diversity and Inclusion Award: Olwethu Masanabo, CFP®<br />

10 www.bluechipdigital.co.za

FPI UPDATES | CEO message<br />

BLUE<br />

CHIP<br />

• Harry Brews Award: Robert Macdonald, CFP®<br />

• It Starts with Me Award: Kim Potgieter, CFP®<br />

• Top Candidate Award: Stephan Lombard<br />

• Top Student Financial Plan winners: University of Johannesburg<br />

(MSK Financial Services)<br />

• FPSB 25 Year Award: The FPI for celebrating 25 years of<br />

CFP certification<br />

2024 will bring challenges,<br />

but it is also packed with<br />

growth opportunities.<br />

Membership Renewal<br />

As we start the new year, we extend our gratitude to the more than<br />

2 500 members who renewed their memberships by 15 December<br />

2023. Membership renewal is open until 31 March 2024 and CPD<br />

compliance is due by 31 May 2024.<br />

Annual Refresher<br />

Looking ahead to 2024, we invite you to join us for the Annual<br />

Refresher (AR2024). Scheduled from the end of February to mid-<br />

March across various regions (Cape Town, Johannesburg and<br />

KwaZulu-Natal) this event features a stellar lineup of speakers,<br />

including Andrew Bradley, Errol Meyer, Wessel Oosthuizen, Lelane<br />

Bezuidenhout and the 2023 Financial Planner of the Year, Lara<br />

Warburton. See our website for more information.<br />

Professional Competency Examination<br />

We extend our heartfelt congratulations to the 76 candidates who<br />

demonstrated competence in the September 2023 examination<br />

sitting. Your success is a testament to your commitment to<br />

excellence, and we eagerly anticipate welcoming you as official<br />

FPI professional members in the near future.<br />

Welcome Q1 2024!<br />

The FPI is gearing up for an exciting start, featuring the online<br />

Budget Speech event on 21 February and the Annual Refresher, both<br />

not to be missed.<br />

But that’s not all. We have got big plans for the year ahead. Four PCEs<br />

are lined up to ensure that as many candidates as possible get the<br />

chance to take FPI’s PCE exam in the “old” format before the transition<br />

to the NextGen Certification Standards in 2025. For more details, dive<br />

into Nici Macdonald’s article in this publication or visit our website.<br />

Our commitment doesn’t stop there. We’re on a mission to localise<br />

the latest global financial planning standards during 2024 as released<br />

by the FPSB in April 2023.<br />

Consumer education takes centre stage, especially with the<br />

anticipated two-component (pot) system, whether it rolls out in<br />

September or March 2024. We believe education is key to steering<br />

consumers away from potential financial pitfalls.<br />

As we navigate through 2024, keep these key areas in mind:<br />

• Two-Component (Pot) System. Be prepared to manage client<br />

expectations and communicate potential delays. Adaptability is<br />

the name of the game.<br />

• Compliance Documentation and Risk Management. Prioritise<br />

compliance documentation, adopt a meticulous approach to risk<br />

management and align with the looming COFI horizon. It’s a crucial<br />

aspect of the journey.<br />

• Continued Professional Development. It is imperative! Focus on<br />

personal development plans, align CPD hours with defined learning<br />

outcomes and stay informed. As financial professionals, take<br />

responsibility for your role as the primary “product” clients invest in.<br />

Yes, 2024 will bring challenges, but it is also packed with growth<br />

opportunities. Let’s embrace the year, tackle the challenges<br />

head-on and make the most of every opportunity – especially in<br />

this election year.<br />

Wishing you all the best until next time,<br />

Lelané Bezuidenhout, CFP®, CEO, Financial Planning Institute<br />

of Southern Africa<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />

On the money<br />

Making waves this quarter<br />

New appointment and the paradox of choice<br />


Alexforbes is pleased to announce the<br />

appointment of Mpho Molopyane as chief<br />

economist, effective from December 2023.<br />

Molopyane is responsible for formulating<br />

the macroeconomic strategy for the business.<br />

Molopyane also has a pivotal role in<br />

executing strategic objectives that align with<br />

the group’s vision.<br />

Molopyane brings with her a wealth<br />

of experience and expertise acquired<br />

through her extensive career in both<br />

the finance and public sectors. She joins<br />

Alexforbes from Absa, where she held the<br />

position of senior economist, overseeing<br />

economic research for multiple African<br />

economies. Prior to her tenure at Absa,<br />

Molopyane served as an economist at Rand<br />

Merchant Bank, with a specific focus on the<br />

South African market.<br />

Her professional background also<br />

includes previous positions at National<br />

Treasury and Standard Bank.<br />


In 2022, Finance Minister Enoch Godongwana amended the maximum<br />

offshore investment limit for Regulation 28 retirement funds from<br />

30% of assets to 45%. However, data shows that most funds haven’t<br />

maximised their exposure to the new limit.<br />

Currently, there is more value to be extracted in the local market: local<br />

equities are trading on a very cheap forward price-to-earnings multiple of<br />

9x (compared to 17x for developed markets) and underpinned by strong<br />

one-year expected consensus earnings growth of 14% (compared to<br />

7% for developed markets); the local long bond market offers enticing<br />

value, with a more predictable nominal long-term expected yield of 12%<br />

against inflation nudging at 5% and the rand offers a 20% discount to<br />

the fair value range against the US dollar. Conversely, if Regulation 28<br />

funds use their rand income to increase US dollar-denominated assets,<br />

they’re currently paying 20% above the currency’s fair value range.<br />

How do financial advisors prudently assist their clients to navigate<br />

the new Regulation 28 changes? Decision-makers are grappling with<br />

the paradox of choice: the breadth of options increases flexibility, but<br />

it’s more difficult to choose high-quality, consistent winners and blend<br />

them in their appropriate proportions.<br />

It’s most important for managers to have an investment philosophy,<br />

objectives and investment process that are clearly defined. The<br />

investment philosophy should articulate core investment beliefs and<br />

principles of how investment value is extracted and risk-managed,<br />

expected patterns of returns, inputs required and evidence of<br />

repeatable outcomes. Tactical asset allocation and risk management<br />

are key in exploiting short- to medium-term opportunities, as well as<br />

unintended risks.<br />

Managers need to have a solid grasp of their portfolio risk management<br />

on a look-through basis: this allows them to understand exposure from<br />

various perspectives, be more responsive and continually reinvent<br />

themselves as they align portfolios with changing times. Portfolio risk<br />

management can identify and de-risk outsized risk contributions from<br />

geographical and sector exposures. Good managers reduce foreign<br />

currency volatility. Investment firms need to aspire to be great stewards<br />

and fiduciaries with the highest ethics, have an enabling culture and<br />

be aligned with their clients’ interests.<br />

For financial advisors looking to prudently exploit the changes to<br />

Regulation 28, the point of departure is always going to be choosing the<br />

appropriate investment manager(s) who will in turn make appropriate<br />

choices on their behalf.<br />

By Conlias Mancuveni, Hollard Investment Managers

BLUE<br />

CHIP<br />

On the money<br />

Making waves this quarter<br />

AI strengthens investments and Ashburton fortifies team<br />


Ashburton Investments, the FirstRand group’s trusted asset manager,<br />

is bolstering its team of investment professionals in the South African<br />

asset management industry, with key new hires under its CEO, Duzi<br />

Ndlovu, who joined in 2022 and CIO, Patrice Rassou, who joined in 2020.<br />

Ashburton currently has R140-billion of Assets Under Management<br />

(AUM) and plans to grow exponentially in the next three years by<br />

scaling its equity, multi-asset, fixed-income and global capabilities,<br />

while widening its distribution footprint.<br />

“The first step in achieving our growth goal was to cement the<br />

investment team under Rassou’s leadership. This included the key<br />

appointment of Charl de Villiers as Head of Equities in 2021. De Villiers<br />

has a stellar portfolio management track record, and his addition has<br />

added significant industry experience to the team,” says Ndlovu.<br />

Vanessa Pillay was appointed as Ashburton Investments’ head of<br />

corporate and commercial distribution in October 2023. She has more<br />

than 25 years of financial markets and asset management experience.<br />


AI has emerged as a game-changer in the realm of investments, but its<br />

relationship with psychology is equally intriguing. Psychology and AI share<br />

a crucial commonality: their reliance on data collection and analysis to<br />

predict outcomes. The interplay between human behaviour and financial<br />

markets underscores the significance of this convergence. The psychology<br />

of money delves into how our attitudes, beliefs and emotions surrounding<br />

money shape our financial behaviours. As AI algorithms sift through vast<br />

datasets, they identify patterns that provide profound insights into investor<br />

sentiment and behaviour.<br />

When it comes to investments, AI transcends the boundaries of<br />

conventional methods. The capacity to classify underlying emotions, such<br />

as fear or enthusiasm, and predicting investor behaviour is where AI excels.<br />

The psychology of money unearths the intricacies of our relationship<br />

with finances. Deep-seated beliefs, past experiences and societal<br />

influences mould our financial behaviours, impacting investment choices.<br />

Understanding these psychological underpinnings is instrumental in<br />

devising effective investment strategies. Investors are a diverse group, each<br />

with their unique tendencies that influence their decisions. Using AI and<br />

psychology can lead to understanding the below investor types:<br />

Market timers. This archetype succumbs to herd mentality, acting<br />

based on prevailing market trends. They often fall prey to emotional<br />

surges during market crashes.<br />

Assertive investors. These individuals thrive on identifying the next<br />

Vuyo Mvulane was appointed as the head of institutional distribution<br />

eight months ago. His experience spans manager research, portfolio<br />

management, business development and client service.<br />

These appointments follow the appointment of Kashif Noor to the<br />

position of head of retail distribution at Ashburton a year ago. Noor was<br />

previously Nedbank’s head of wealth management for the Cape and<br />

coastal regions. He also previously worked for ABSA Wealth, Coronation<br />

and Lloyds TSB.<br />

Focusing on financial intermediaries, specifically independent<br />

financial advisors, LISP platforms as well as DFMs, Steven Amey was<br />

appointed as the head of intermediated distribution at the start of<br />

2023. He gained his asset management, asset consulting, short-term<br />

insurance, healthcare and financial planning expertise fulfilling senior<br />

roles at Discovery Invest, Sasfin, Ninety-One and Glacier. With more<br />

than 22 years of distribution experience, Amey holds an MCom in Tax<br />

and is a CFP®.<br />

big investment trend. They exhibit a proactive approach and aren’t afraid<br />

to take calculated risks to secure substantial gains.<br />

Anxious investors. Anxious investors are cautious and risk-averse,<br />

particularly in volatile markets.<br />

Avoider investors. This group prefers conservative, low-risk<br />

investments. They might be open to risk-taking in non-financial aspects<br />

of their lives.<br />

Number of Funds Portfolio Value Age<br />

$<br />

Size of Switch Number of Switches 12m Switch History<br />

Perfomance<br />

vs Peers<br />

Why do investors switch?<br />

Machine learning using over 12 million observations tells us<br />

2 1 3 2 1 3<br />

12m Perfomance<br />

$<br />

6m Perfomance<br />

Loss system<br />

Belief system<br />

Win-Stay<br />

Lose-Move<br />

Risk perception

BLUE<br />

CHIP<br />

On the money<br />

Making waves this quarter<br />

JSE de-listings<br />


The increased number of companies de-listing from the JSE has elevated<br />

investor concerns about the investment outlook for SA Equities. The<br />

shortage of new listings, the relatively weak performance of local shares<br />

and depressed levels of business confidence have further exacerbated<br />

fears among market participants. While the de-listing trend is concerning,<br />

the debate is less about the number of de-listings and more about the<br />

level of market concentration and its impact on investment portfolios.<br />

De-listings have had minimal impact on JSE trading and liquidity<br />

given the high levels of index concentration and size of the main index<br />

constituents. The direct impact of smaller companies exiting the market is<br />

also less meaningful when viewed through the lens of how equity funds<br />

are currently constructed.<br />

Most of the companies that have de-listed were not core holdings in<br />

benchmark cognisant domestic equity portfolios. Approximately 70% of<br />

de-listings over the last five years would be categorised as small-cap or<br />

fledgling companies with market caps of less than R300-million, placing<br />

them outside the investable universe of fund managers tracking the<br />

index. There are exceptions but, on average, domestic equity funds<br />

holding the majority of pension and retirement assets have remained<br />

unaffected by the shrinking opportunity set. In aggregate, investors<br />

have already been allocating capital as if the market is narrower than<br />

it is.<br />

By Sean Neethling, Head of Investments at Morningstar South Africa<br />

. .,,01,.\W of Cope<br />

l:.<br />

(U)ucr Law@work<br />

,,, •• ,.n- 0 0 -i,• Professional Development Project<br />

UCT Law@work is a self-funded unit within UCT’s Faculty of Law, offering short courses,<br />

seminars and workshops on topical legal issues. UCT Law@work also offers self-paced<br />

online courses, which allows you to register and study at your own pace. No deadlines!<br />

The following self-paced courses are on offer:<br />

• Software law<br />

• Legal compliance in workplace restructuring and retrenchment<br />

• Casualty insurance practice<br />

• Muslim marriage contracts<br />

For more information email: don.coue@uct.ac.za or visit: www.lawatwork.uct.ac.za

Cape Town: 6 & 7 March | Johannesburg 12 & 13 March<br />

www.theinvestmentforum.co.za<br />

Brought to you by:

BLUE<br />

CHIP<br />

COLUMN<br />

How to get the year off to a good start.<br />

The start of a new year is a great time to reflect on what worked and what didn’t in the past.<br />

Florbela Yates,<br />

Head of Equilibrium<br />

Florbela Yates is the head of<br />

Equilibrium in the Momentum<br />

Metropolitan group.<br />

Equilibrium is an independent<br />

discretionary fund manager<br />

that partners with financial<br />

advisors to help them enable<br />

their advice outcomes.<br />

Equilibrium brings balance to<br />

an advice practice by delivering<br />

services and investment<br />

solutions to help clients achieve<br />

their defined investment goals.<br />

It’s also a great opportunity to declutter and set<br />

clear plans to get you to where you want to be.<br />

I usually start by listing things that I was happy<br />

with and those that I would like to improve on.<br />

Putting this down on paper makes it real and makes<br />

the objectives clear. Having too many goals is a<br />

non-starter.<br />

I usually start with a big list, let them rest<br />

for a day or two and then settle on a maximum<br />

of 10 goals that I filter into what is realistic and<br />

measurable. I also split them into short, medium<br />

and long-term goals so they are easier to manage.<br />

Then lastly, I allocate “accountable buddies” to<br />

help me stay on track.<br />

From an investment perspective, when I set<br />

goals, I always begin with a budget. That way, I<br />

know exactly what my income and expenses are.<br />

I believe that everyone can save, even if it begins<br />

with small amounts. But if you’re someone who<br />

isn’t very disciplined then I’d recommend putting<br />

measures in place to help you stick to the savings<br />

goal. People who are tempted to spend whenever<br />

they have money in their account may do well to<br />

set up a monthly debit order to set aside a specific<br />

amount in a savings or investment account. Or they<br />

may call on someone whom they trust to act as their<br />

accountable buddy. This person is responsible for<br />

asking whether you need that item and reminding<br />

you of the goal that you set for yourself. The way<br />

I think about it is, that you’re avoiding short-term<br />

pitfalls in return for a focus on a longer-term goal.<br />

If building long-term wealth is a goal, here is a<br />

simple step-by-step guide that has helped me and<br />

many of my clients stay focused:<br />

1. Set a clear goal.<br />

2. Ask yourself if it’s achievable and how you will<br />

measure success.<br />

3. Identify what is working to get you to your goal.<br />

4. Identify what has held you back from reaching<br />

this goal. Is it that you aren’t saving? Or not<br />

saving enough? Is it your habits or lack of<br />

disposable income or the fact that the goal<br />

is too long-term?<br />

5. Put down strategies to help you achieve the<br />

goal. For example, if it’s a lack of disposable<br />

income, go back to the budget and see<br />

what unnecessary expenditure you can<br />

cut. If it’s a habit of grabbing coffee every<br />

time you walk past the coffee shop, try to<br />

take a different path to your desk. And if it’s<br />

just that you can’t avoid temptation, find an<br />

accountable buddy.<br />

6. The road to building financial wealth is a<br />

long one but if you break the goal down<br />

into sub-goals with different time horizons,<br />

it makes it easier to measure, such as:<br />

a) Saving for retirement – this is a longterm<br />

goal and can be dealt with by ensuring<br />

that you make monthly contributions to a<br />

retirement annuity or retirement fund.<br />

b) Setting aside a monthly amount for a<br />

car or house deposit – this could be a<br />

medium-term goal that forces you to plan<br />

years ahead.<br />

c) Shorter-term goals, which may require<br />

some sacrifice to set aside a larger portion<br />

of income each month.<br />

7. Lastly, it’s important to measure how you<br />

are going. Ask yourself continuously if the<br />

goal is realistic and then adjust. This could<br />

include changing the investment horizon,<br />

the capital that you are investing, or both.<br />

8. When in doubt, find a financial coach or<br />

advisor to help you. <br />

16 www.bluechipdigital.co.za

COLUMN<br />

BLUE<br />

CHIP<br />

The power of incentives<br />

The human side of investing.<br />

Rob Macdonald, Head of Strategic<br />

Advisory Services, Fundhouse<br />

Rob Macdonald has held<br />

several senior positions in<br />

the investment industry.<br />

At Fundhouse, he acts as<br />

a consultant and coach<br />

to financial advisors and<br />

develops and facilitates training<br />

programmes in behavioural<br />

coaching and practice<br />

management. Before joining<br />

the financial services industry,<br />

Macdonald was MBA director<br />

at the UCT Graduate School<br />

of Business. Business. He has<br />

written the book The 7 Pillars<br />

of Financial Health and is coauthor<br />

of the book Rethinking<br />

Leadership and has consulted,<br />

written and spoken widely on a<br />

range of topics. Macdonald has a<br />

Master’s degree in Management<br />

Studies from Oxford University<br />

and is a CFP® Professional.<br />

Late last year, the world lost one of its great<br />

investment brains with the passing of<br />

Charlie Munger, Warren Buffett’s long-time<br />

investment partner. Perhaps distinctive to<br />

Munger was his interest in the human side of<br />

investing, the essence of which he first captured<br />

in a speech entitled “The Psychology of Human<br />

Misjudgement” in 1995 at Harvard University.<br />

Central to this misjudgement are 25 cognitive<br />

biases that he believed lead to poor decisions,<br />

and consequently poor outcomes.<br />

Neither Munger nor Buffett has ever shied<br />

away from observing when investors are<br />

exercising poor judgement. Most recently, Buffett<br />

referred to Bitcoin as “rat poison squared” and at<br />

the Berkshire Hathaway AGM in 2000, Munger<br />

said of the late-19<strong>90</strong> dot.com bubble that “if you<br />

mix raisins with turds, they’re still turds”. Even<br />

though two of the smartest investors ever offer<br />

such insights, many investors don’t take note.<br />

In March 2000, the dot.com bubble burst,<br />

while investors still pursue Bitcoin with vigour,<br />

some luckier than others.<br />

South African investors recently suffered the<br />

collapse of the BHI Trust run by Craig Warriner in<br />

which up to R2.7-billion of investors’ money may<br />

be lost. Despite being an unregulated investment,<br />

licensed financial advisor Global & Local put<br />

clients’ money into it. Ironically, the name “BHI”<br />

refers to “Berkshire Hathaway Investments”,<br />

Warriner clearly leveraging credibility off Buffett<br />

and Munger’s legendary listed investment vehicle.<br />

The first of Munger’s 25 biases is the “Reward/<br />

Punishment Super Response Tendency”. Munger<br />

believed that the power that incentives and<br />

disincentives have on the actions of others cannot<br />

be overstated. One assumes that there was an<br />

incentive for Global & Local to put clients’ funds<br />

into an unlicensed investment vehicle. And clients<br />

were undoubtedly incentivised by the promise of<br />

high returns.<br />

The dust is yet to settle on the BHI debacle and<br />

yet another one is already playing itself out. No<br />

surprise it’s in the form of an unlicensed investment<br />

vehicle. GSPartners promotes and distributes an<br />

investment product called “MetaCertificates”<br />

which promises returns to international investors<br />

ranging from 2.5% to 4.15% per week, [1] while in<br />

South Africa the promised returns are as high as<br />

22% per week. [2]<br />

To put that into perspective, the long-term<br />

real return on South African equities is 7% per<br />

year, significantly less than the weekly return<br />

promised by GSPartners! The FSCA issued a<br />

warning late last year for investors to be wary of<br />

GSPartners, while cease and desist orders have<br />

been issued against it by several jurisdictions in<br />

the US and Canada.<br />

Munger’s first bias suggests that these<br />

schemes will repeatedly rear their ugly head;<br />

after all, they always have incentives, both for<br />

promoters and investors. Believing in unrealistic<br />

returns is a cognitive error – not understanding<br />

what’s realistic, and an emotional one – greed.<br />

Both are great incentives, nevertheless. But<br />

there is also the social incentive. GSPartners<br />

has been actively promoted in South Africa by<br />

well-known sports personalities such as Victor<br />

Matfield, Herschelle Gibbs, Lucas Radebe and<br />

Toks van der Linde. It’s not just about the money,<br />

it’s about being part of this celebrity group.<br />

When making decisions, investors repeatedly<br />

fall foul of the three elements of what I call the<br />

Bermuda Triangle of Investing: cognitive errors:<br />

emotional responses and social influences. All<br />

three play a role in Munger’s Reward/Punishment<br />

Super Response Tendency. Central to a financial<br />

planner’s value is helping clients to navigate these<br />

three elements on an ongoing basis. Making this<br />

job easier would be that whenever you get a sniff<br />

of an investment that looks like “rat poison” or a<br />

“turd”, don’t only keep your clients’ noses out of<br />

it, alert the public and the regulator too. I believe<br />

professional financial planners have a collective<br />

incentive and responsibility in this regard. And no<br />

doubt, Charlie Munger would approve. <br />

[1]<br />

BC Securities Commission, Temporary Order, 11/16/2023, Peter J. Brady,<br />

Executive Director.<br />

[2]<br />

“Red flags over GSPartners highlight spread of dodgy crypto providers”<br />

by Neesa Moodley, Daily Maverick, 3 December 2023.<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />

COLUMN<br />

Social media in financial planning<br />

A practical guide for professionals.<br />

Kobus Kleyn, CFP®, Tax<br />

and Fiduciary Practitioner,<br />

Kainos Wealth<br />

Kobus Kleyn has published<br />

over 200 articles and authored<br />

four books. He is a multiple<br />

award-winning professional<br />

and holds eight memberships<br />

with professional associations.<br />

His most recent awards were<br />

lifetime achievements awards<br />

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

The Million Dollar Round<br />

Table (Top of the Table Life<br />

Membership) and Liberty Group<br />

(Life Membership) in 2021/22.<br />

As a Senior Certified Financial Planner<br />

and an author well-versed in personal<br />

branding, I have come to appreciate<br />

the significant role social media plays<br />

in our profession. My experiences and insights,<br />

particularly those shared in Accelerate Your Brand,<br />

have underscored the value of these platforms in<br />

enhancing client relationships and professional<br />

growth. Let me share some practical perspectives<br />

on harnessing social media effectively in our field.<br />

The balanced approach to social media<br />

Social media offers us an unparalleled platform for<br />

sharing our expertise and insights. However, it’s<br />

crucial to navigate this space with a sense of balance.<br />

While we strive to be informative and engaging,<br />

we must always remain within the bounds of<br />

professional conduct and regulatory compliance.<br />

Every shared insight must align with the high<br />

standards of our profession.<br />

Education via digital channels<br />

The most rewarding aspect of social media is the<br />

opportunity to educate. By simplifying complex<br />

financial concepts and sharing informed insights,<br />

we significantly contribute to enhancing financial<br />

literacy. This effort cements our reputation as<br />

knowledgeable advisors and fosters a deeper<br />

understanding among our clients, which is<br />

essential for building long-lasting relationships.<br />

Crafting a professional online presence<br />

In our profession, a strong personal brand is<br />

essential. Social media is a tool that, when used<br />

wisely, can enhance our professional visibility.<br />

The key is to engage with our audience in a way<br />

that reflects our commitment to our profession.<br />

Every post and interaction should add tangible<br />

value, strengthening our professional standing<br />

and providing genuine benefit to our audience.<br />

Keeping up with changes and innovations<br />

Our profession is constantly adapting to new<br />

technologies, regulatory changes and market<br />

shifts. Social media often serves as the frontline<br />

for such developments. Active participation in<br />

these digital conversations keeps us informed<br />

and prepared, allowing us to adapt our<br />

strategies and advice to reflect the latest trends<br />

and regulations.<br />

Utilising social media for client engagement<br />

Engaging with clients on social media goes<br />

beyond posting regular updates; it involves<br />

active listening and interaction. Responding to<br />

comments, addressing concerns and participating<br />

in relevant discussions can significantly enhance<br />

client engagement. This approach not only<br />

demonstrates our commitment to our clients but<br />

also helps in understanding their evolving needs<br />

and expectations.<br />

Transparency and consistency<br />

Trust is the cornerstone of our profession,<br />

and social media can be a powerful tool in<br />

building and maintaining this trust. Consistent,<br />

transparent communication that reflects our<br />

professional ethics and values can go a long<br />

way in solidifying client trust. It’s about creating<br />

a digital presence that clients can rely on for<br />

accurate, helpful information.<br />

Challenges and responsibilities<br />

While social media offers numerous advantages,<br />

it also poses certain challenges, particularly<br />

regarding information accuracy and privacy<br />

concerns. As professionals, it is our responsibility<br />

to ensure that the information we share<br />

is accurate, and up-to-date and in no way<br />

compromises client confidentiality or privacy.<br />

Conclusion<br />

In conclusion, social media, when navigated with<br />

care and professionalism, can be a potent tool<br />

for financial planners. It offers us a platform to<br />

educate, engage and evolve with the changing<br />

landscape of our profession.<br />

As we harness its potential, let us remain<br />

committed to the principles of integrity and<br />

excellence that define our work. By embracing<br />

social media thoughtfully, we can enhance our<br />

client relationships and professional growth<br />

and also contribute positively to the broader<br />

financial community.<br />

18<br />


BLUE<br />

CHIP<br />

INVESTMENT | Leadership<br />


Ferdi van Heerden took over the reins at Momentum Investments in September 2023.<br />

He has filled a range of executive positions in the Group, culminating in more than a<br />

decade of leadership in the international investment industry as head of Momentum<br />

Global Investment Management in the UK. <strong>Blue</strong> <strong>Chip</strong> caught up with him.<br />

20 www.bluechipdigital.co.za

INVESTMENT | Leadership<br />

BLUE<br />

CHIP<br />

Congratulations on your appointment as CEO of Momentum<br />

Investments. How do you feel about this opportunity?<br />

I have been privileged to spend 30 years in various roles at the<br />

Momentum Metropolitan Group, with three years in Zurich and the<br />

last 13 years in London. It has given me a wealth of experience in and<br />

exposure to the investment industries both locally and internationally.<br />

This new role will be an opportunity for me to plough back<br />

some of the experience I have built up courtesy of the Group, and<br />

to use the exposure I have had to guide our business during its<br />

next growth phase and take it forward. There’s much that we can<br />

do and should do in a fast-paced, changing world.<br />

I look forward to leading the Momentum Investments team<br />

on this journey and helping build collective dreams into reality.<br />

What is your objective in your new role?<br />

We are a people’s business. We have an excellent team of people<br />

in the various Momentum Investments businesses in the Group,<br />

both in South Africa and the UK.<br />

My immediate objective will be to solidify the foundation that<br />

was laid under Jeanette Marais’s leadership over the last five<br />

years and to build on this to set ourselves up for a sustainable<br />

global future.<br />

One of my key objectives is to develop a truly global perspective<br />

in our business so that we deliver an international set of capabilities<br />

to our clients and advisor base.<br />

Our clients increasingly invest offshore and when they trust<br />

us with investing their money, we must do so in a well-balanced<br />

manner in opportunities across the world to ensure the best riskadjusted<br />

outcomes for them. To do so, we need to have global reach<br />

and capabilities. Given my tenure in London for the past decade, I<br />

can help focus our business to truly have a global mindset.<br />

Career history<br />

Ferdi van Heerden joined Momentum Global Investment<br />

Management (MGIM) in 2010 after serving three years as CEO<br />

of a start-up insurance venture in Switzerland. He has held<br />

several senior executive positions in Momentum Metropolitan<br />

Holdings Limited (MMH) and the FirstRand Group, both listed<br />

companies on the JSE. During his career of circa 30 years<br />

with these Groups, his responsibilities included heading up<br />

Momentum’s individual life operation, the private pension<br />

fund administration business, as well as FirstRand’s consumer<br />

banking division.<br />

Ferdi has 35+ years of experience in the life insurance and<br />

investment industries in South Africa, the UK and Europe.<br />

What is Momentum Investments’ unique selling proposition?<br />

For us, it is always about people which is captured in our tagline:<br />

“With us, investing is personal”. It is as much about the customer<br />

journey as it is about the customer’s investment outcome.<br />

Therefore, we make it our business to understand the individual<br />

needs of our advisor partners and clients so that we can help them<br />

achieve what they set out to do.<br />

As a Group, our stated objective is to help individuals and<br />

businesses achieve their financial objectives. We try to make it<br />

easier for them to invest with confidence and secondly to stay<br />

invested. Our unique selling proposition in a nutshell is our people,<br />

our culture as well as our attitude to partnerships and business.<br />

In my view, a challenge equals an<br />

opportunity if you are proactive.<br />

Please outline Momentum Investments’ investor capabilities<br />

locally and offshore.<br />

Given the breadth of our capabilities, this could be a conversation<br />

on its own. But let me summarise it in three buckets. First, in<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />

INVESTMENT | Leadership<br />

terms of our investment capabilities, we have a wide range of<br />

local and offshore fund solutions, with various risk profiles. We<br />

consider ourselves a specialist multi-asset investment manager,<br />

with solutions in multiple jurisdictions. In South Africa, we<br />

have locally authorised unit trusts, in the global space we have<br />

UK-domiciled unit trusts, Luxembourg-domiciled funds and<br />

Guernsey solutions; so quite a wide range that speaks to our global<br />

clients’ requirements.<br />

While multi-asset is a key focus area for us, we also have a range<br />

of single-asset class solutions, both locally and internationally,<br />

and specialised skills. In South Africa, these include systematic<br />

strategies, fixed income, as well as alternative solutions, including<br />

thematic investments. In the UK, we’ve got great global fixed<br />

income and direct real assets investment capabilities. For other<br />

asset classes, we choose to execute via our select global and local<br />

range of asset management partners, which includes Robeco.<br />

In the wealth management (retail) space, we are and have<br />

been one of the leading investment platform providers, both<br />

with our local Momentum Wealth platform, as well as our offshore<br />

Momentum Wealth International platform in Guernsey. We were<br />

one of the first linked investment service providers (LISP) in South<br />

Africa offering local and global solutions to our South African<br />

clients, as well as to expat investors in various jurisdictions<br />

around the world. We have a wide range of retirement solutions<br />

in our retail business which are well set up to look after the<br />

retirement needs of clients, including our life, living and hybrid<br />

annuity solutions.<br />

To service our advisor partners well, we have a strong<br />

discretionary fund manager capability under the Equilibrium<br />

brand that speaks to an advisor’s need for managed portfolios.<br />

Lastly, our Momentum Securities business initiates access to<br />

bespoke wealth management needs of high-net-worth clients as<br />

well as institutional stock-broking needs.<br />

As an investment company operating in multiple spaces,<br />

how do you deal with the different sustainability taxonomies<br />

across markets?<br />

As an investment business, we have a key role to play in terms<br />

of ensuring that we help create a sustainable future world for<br />

our clients and the next generations. We follow an integrated<br />

investment approach towards environmental, social and<br />

governance (ESG) factors and responsible investing to help<br />

enable this. Given the multiple jurisdictions in which we operate,<br />

this also means that we are subject to different regulatory<br />

taxonomies regarding ESG.<br />

Global investment managers would prefer one common taxonomy<br />

that applies to all sustainable investments and jurisdictions, but<br />

this isn’t likely to happen soon given different local government<br />

We've always been an adviceled<br />

investment manager.<br />

and regulatory priorities. We are already subject to the Sustainable<br />

Finance Disclosure Regulation (SFDR) in Luxembourg given our<br />

global fund range.<br />

Recently, the Financial Conduct Authority (FCA) in the UK<br />

announced its sustainability disclosure requirements (SDR), which<br />

is different to the SFDR. This introduces complexity and additional<br />

costs in terms of the disclosure requirements when we distribute<br />

funds in multiple markets.<br />

Quite a few fintech AI-type solutions are becoming available<br />

that will help with the reporting requirements for the different<br />

taxonomies and will save a lot of effort and costs but will also<br />

assist in ensuring fair reporting and address concerns with<br />

regards to greenwashing.<br />

Please discuss the role of technology, and specifically AI, for<br />

the future of the investment industry.<br />

I firmly believe an AI-driven technology revolution is underway<br />

that will reset the rules of financial services and the future of<br />

investment managers. The investment industry is not known for<br />

leading technology innovation, and a mindset shift is now required<br />

in this regard. Ignoring this will be at our peril.<br />

The use of new technologies will be imperative to manage<br />

margins in our business as they bring efficiencies to regulatory<br />

and commercial pressures on fees. Our operating models will have<br />

to adapt to ensure they are resilient and future fit.<br />

Also, technology is changing how clients wish to deal with<br />

investment management firms and how they access investments<br />

in the future. We must make sure that we keep pace with that as an<br />

industry. However, any technology solution is as good as the data<br />

that the technology is using. Hence, a big focus for Momentum<br />

Investments is data integrity that would enable and support<br />

various forms of AI-enabled solutions.<br />

Over the years, our Group has invested in several fintechs and<br />

insure-techs through our Exponential venture funds in the UK<br />

and South Africa, which gives us access to new thinking and an<br />

opportunity to see “the Art of Possibility”.<br />

Our FNZ partnership in the wealth management space will<br />

bring a lot of digital capabilities to our LISP platforms in South<br />

Africa and Guernsey.<br />

About 18 months ago, we embarked on a project to explore the<br />

potential use of AI in our investment processes in our UK business.<br />

The intent will be to use this to provide market and asset class<br />

analysis at scale, and to use this as an enabler to assist our portfolio<br />

managers with their tactical investment decisions. While still early<br />

days, we can certainly see the benefit of AI and how this can inform<br />

decision-making of our investment team.<br />

We are a people’s business first and foremost, and we see<br />

technology (and therefore AI) as an enabler for how we do<br />

business and analyse data. Our intent is not to replace our<br />

people with technology. We use technology to provide scale<br />

and capacity and to enhance our decision-making across the<br />

business. If anything, we need to do more and experiment more<br />

and be brave in that space.<br />

22 www.bluechipdigital.co.za

INVESTMENT | Leadership<br />

BLUE<br />

CHIP<br />

For us, it is as much about the<br />

customer journey as it is about<br />

the customer outcome.<br />

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

financial success for investors?<br />

Two key factors that I would highlight are the need for advice, and<br />

time. We’ve always been an advice-led investment manager. We<br />

believe in the need for advice. Investments have a profound impact<br />

on your future and in retirement. The outcome that you achieve in<br />

years to come depends very much on the advice you receive now.<br />

Many people forget the importance of time in investment<br />

outcomes. The earlier you start the better. Often advice is not<br />

available to young people at the early stages of their professional<br />

lives, and it is critical that this changes.<br />

Also, staying invested over time is paramount. Too often,<br />

decisions to disinvest and reinvest are made at the wrong times.<br />

Consistency of staying the course and investing over long periods<br />

is important. Partnering with a financial advisor will help enable<br />

investors to choose the suitable options for them and take any<br />

changing circumstances into account along the journey.<br />

What are the opportunities and challenges for Momentum<br />

Investments as a group in 2024?<br />

Whether it’s 2024 or beyond, there are many challenges. In my<br />

view, a challenge equals an opportunity if you are proactive and<br />

you have a positive attitude. The world has many challenges<br />

geographically, socially, environmentally, economically and<br />

technologically. It’s how we deal and interact with these challenges<br />

that will determine our future success.<br />

Globally, a major challenge that we are all facing in investment<br />

management is the lack of enough investing by consumers. People<br />

disinvest and then remain disinvested, or they use the money to<br />

maintain a lifestyle in the short term. It has to do with affordability<br />

(cost of living pressures), but it is often also a mindset. It has<br />

become too easy to spend money as opposed to investing it.<br />

As an industry, we need to educate and engage consumers<br />

and make sure that investing is exciting for them, that it is easy<br />

to access investment products and that we provide appropriate<br />

information to enable them to stay invested. Consumers need to<br />

understand what they are investing in, and the future value that<br />

they are creating for themselves in doing so.<br />

We’re passionate about the effect that investments can have on<br />

people’s lives. Investing and saving more must become a nationalfocused<br />

drive in South Africa because it impacts materially on<br />

people’s long-term futures, specifically in retirement and their<br />

ability to achieve their life goals.<br />

With digitalisation, we can hopefully enable that a bit more. It<br />

needs an ongoing collective effort from the industry to make sure<br />

that we fly the flag of the need for people to invest and save more.<br />

How does Momentum Investments drive wealth management<br />

value chain alignment?<br />

The whole future in financial services is about how we participate<br />

and engage in various ecosystems and value chains.<br />

We value advisors in our industry, acknowledge their importance,<br />

and take time to understand their needs. In the front office where<br />

the client connection is key, our products and investment platform<br />

can easily integrate and support the requirements of our advisor<br />

and institutional partners.<br />

In our middle and back office, we use a variety of global<br />

and local partnerships. We align ourselves and integrate with<br />

global fund administrators and custodians in all the jurisdictions<br />

where our funds are domiciled to ensure seamless execution of<br />

investments on behalf of our clients.<br />

Hence, digitalisation is a key focus area for us to ensure that our<br />

operating models are fit for purpose and can easily become part of<br />

various vertically integrated networks. FNZ as a global technology<br />

partner on our funds’ platforms is part of this.<br />

Our DNA has always been focused on advisors. We know how<br />

to work closely with advisors so that when they need us to align<br />

our investment propositions with their advice philosophy, we can<br />

do so. For us, it is about the ecosystems that we participate in. <br />

Professional qualifications<br />

BSc Honours in Mathematical Statistics, Advanced<br />

Management Programme (AMP) from INSEAD (France).<br />

Diploma in General Management from Reading University<br />

(Henley Business School/UK). Member of the Chartered<br />

Institute for Securities and Investments (MCSI).<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP INVESTMENT | Offshore<br />

Momentum Investments and<br />

Robeco launch partnership<br />

in Southern Africa<br />

Strategic partnership deepens portfolio integration in quantitative equity products and research.<br />

Momentum Investments and Robeco have entered<br />

a strategic partnership, affording Momentum<br />

Investments access and exclusive distribution rights<br />

to Robeco’s quantitative equity portfolios and<br />

research support for the Southern Africa Development Community<br />

region. The partnership also provides Momentum Investments<br />

with broad access to Robeco’s best practices and insights.<br />

As allocators of capital across the investment team in London<br />

and South Africa, we identified Robeco as a core partner to deepen<br />

integration between the local and global portfolio allocations,<br />

deemed as a crucial investment success factor.<br />

Robeco is an international asset manager founded in 1929 and<br />

a global leader in quantitative and sustainable investing since<br />

1995. Quantitative or “quant” investing is an investing strategy that<br />

uses mathematical models and data analysis to make investment<br />

decisions and manage portfolios more systematically.<br />

The partnership follows five years of collaboration between<br />

Momentum Investments and Robeco. With this partnership, we<br />

can achieve more holistic integration and alignment of local and<br />

global allocations by using Robeco quants as a core provider in<br />

Mike Adsetts, Chief Investment Officer, Momentum Investments<br />

global equity funds. This integration has been created through the<br />

alignment and harmonisation of investment style factors between<br />

South Africa and offshore equity allocations, as well as portfolio<br />

construction that accounts for the complementary characteristics<br />

of various equity markets.<br />

Sustainability and responsible investing resonate deeply<br />

with us and Robeco, and the partnership will enable Momentum<br />

Investments to further improve the environmental, social and<br />

governance (ESG) profile and carbon footprint of its global<br />

portfolios. We continue to progress on our sustainability journey<br />

and integrate the principles encapsulated in our policies on<br />

responsible investment, climate change, engagement and<br />

proxy voting.<br />

The continued relaxation of exchange controls has increasingly<br />

required assets managed in South Africa to have strong alignment and<br />

integration between the local and global components of portfolios,<br />

which also ensures the consistency and integrity of the investment<br />

philosophy and risk management. The strategic partnership with<br />

Robeco, together with our London office, Momentum Global<br />

Investment Management, as well as South African-based teams, will<br />

ensure that we can continue to provide investors with world-leading<br />

insights and access to global investment opportunities.<br />

“The synergy between Momentum and Robeco empowers us<br />

to deliver our clients unmatched, integrated portfolios spanning<br />

both local and global assets. In the dynamic South African<br />

investment landscape, change is upon us. As the need for offshore<br />

assets surges, our powerful partnership merges Robeco’s global<br />

knowledge with our South African expertise. Together, we are<br />

shaping the future of world-class investing,” says Jeanette Marais,<br />

chief executive officer of Momentum Metropolitan.<br />

We are excited by the prospects afforded by the partnership and<br />

look forward to the ability to leverage the complementary skills of<br />

Momentum and Robeco to the benefit of all our sstakeholders,” says<br />

Mike Adsetts, Chief Investment Officer of Momentum Investments.<br />

For more information, speak to your Momentum consultant or go<br />

to momentum.co.za.<br />

24 www.bluechipdigital.co.za

INVESTMENT | Economy<br />

BLUE<br />

CHIP<br />

Top 10 trends shaping tomorrow<br />

Investors, envisioning a route away from a deeper or more<br />

prolonged recession, are nevertheless still likely to grapple with<br />

a moderation in global economic activity in 2024, driven by the<br />

ongoing repercussions of tight monetary policies, constrained<br />

government coffers, lingering inflation and unpredictable<br />

geopolitical events. Amid these challenges, we are closely<br />

monitoring 10 key trends on our macro radar for the year ahead:<br />

Trend #1: The inevitable gravitational pull of economic forces<br />

Around the world, inflation is receding and unemployment rates<br />

have largely stabilised as major central banks have hit the pause<br />

button on their monetary tightening measures. Moreover, despite<br />

China grappling with a property crisis, signs of potential benefits<br />

from backend-loaded stimuli are likely to emerge more strongly in<br />

the months to come. Nonetheless, the underpinnings of economic<br />

growth resilience in 2023 seem fragile. High interest rates are likely<br />

to start biting and economic hardship could ensue if high rates<br />

persist.<br />

Trend #2: Varied growth paths<br />

The global economy, emerging from differing regional postpandemic<br />

output losses, faces divergent growth prospects. While<br />

robust consumer spending in the United States is expected<br />

to slow as excess savings dry up, Europe is contending<br />

with economic pressures and calls for fiscal austerity<br />

will likely limit recovery. China, on the other hand,<br />

is anticipated to benefit from meaningful policy<br />

announcements made late in 2023, following a<br />

disappointing response from authorities earlier<br />

in the year.<br />

Trend #3: A more gradual ebbing of inflation<br />

The challenge of reducing excess inflation proves<br />

more difficult later in the cycle. Despite global<br />

inflation having more than halved, the<br />

International Monetary Fund warns that<br />

inflation in <strong>90</strong>% of inflation-targeting<br />

countries will likely still exceed central<br />

bank targets in 2024.<br />

Trend #4: The interplay between<br />

monetary and fiscal policies<br />

The pandemic-induced recession<br />

demanded closer coordination<br />

of fiscal and monetary policies.<br />

Calls for fiscal responsibility<br />

and more targeted fiscal frameworks are likely to sound louder to<br />

address pressures on debt sustainability.<br />

Trend #5: An unsettling geopolitical backdrop<br />

Navigating global complexities has become even more challenging<br />

with the unfolding Middle East events. Moreover, The Economist<br />

notes that elections in 2024 for over half of the world’s population<br />

will further contribute to an uncertain geopolitical landscape.<br />

Trend #6: South Africa’s coalition complexities<br />

Substantial advances in support for fringe parties can signal<br />

South Africa’s evolving democracy, yet it can also foreshadow a<br />

more divided society. The ruling party faces challenges ahead<br />

as we approach the 2024 elections given its inability to resolve<br />

shortcomings in energy and logistics, alongside insufficient<br />

progress made in curbing corruption.<br />

Trend #7: South Africa’s ongoing logistical hurdles<br />

Despite progress in Eskom’s turnaround plan and private<br />

sector investment in renewable energy, escalating logistical<br />

challenges are affecting rail and port efficiency and dampening<br />

growth prospects.<br />

Trend #8: South Africa’s fiscal tightrope<br />

South Africa faces worsening fiscal challenges, with the latest<br />

budget forecasts indicating increased government debt. The<br />

interest burden and social demands remain high, hindering a swift<br />

stabilisation in the country’s debt ratio.<br />

Trend #9: A respite from inflation<br />

Though renewed risks to the South African inflation forecast<br />

exist, demand-led pressures and wage inflation are expected<br />

to remain contained.<br />

Trend #10: Hawkish echoes to persist<br />

Major global central banks have paused their rate hiking cycles<br />

but have hinted they remain ready to act in case disinflation<br />

trends reverse. The South African Reserve Bank is expected to<br />

continue talking tough on inflation even though the next move<br />

in interest rates is likely lower from here, most likely by the<br />

middle of 2024.<br />

As investors navigate the nuances of moderating growth and<br />

geopolitical uncertainties in 2024, these 10 trends are likely to<br />

shape the trajectory of global politics, economics and financial<br />

markets in the months to come. <br />

Sanisha Packirisamy, Economist, Momentum Investments<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />

INVESTMENT | Innovation<br />

Shaping the future of investment<br />

management and advice, today<br />

Momentum Investments’ Research Hive is a purposefully created hub of research and innovation activity<br />

dedicated to advancing the worlds of effective investment management and advice for both the business<br />

and our clients.<br />

Inside the Hive, we’re committed to a clear purpose: drive<br />

the evolution of our investment management and advice<br />

propositions by blending innovative quantitative investment<br />

research, technology and data science, market insight, and<br />

a profound understanding of human behaviour through the<br />

behavioural finance lens. We aim to enhance our investment<br />

management business, technology and client insights to not only<br />

meet but exceed the expectations of our clients in an ever-evolving<br />

financial landscape.<br />

To develop our internal research capabilities, we have<br />

collaborated extensively in the industry to ensure that we remain<br />

relevant in the market. Our close connection with research<br />

brokers and academia (through our university relationships and<br />

sponsored research projects), as well as with global research<br />

providers and asset managers, ensures that we are at the forefront<br />

of research and trends in the industry from technical, academic<br />

and practical perspectives.<br />

Academic research with machine learning<br />

An example of our close relationship with universities can be seen<br />

in our collaboration with Stellenbosch University in the context of<br />

machine learning. Machine learning is a rapidly growing field that<br />

offers many potential applications in investment management<br />

and related fields in financial services. Stellenbosch University has<br />

committed to developing its capabilities in this field of study through<br />

its creation of the School for Data Science and Computational<br />

Thinking. It is also an important focus for Momentum Investments<br />

as it offers many potential applications for us in investment<br />

management, behavioural finance and advice.<br />

Professor Evan Gilbert, a research strategist in the Research Hive,<br />

will be seconded on a part-time basis to the university from 2024<br />

onwards. He will supervise research projects at the Master’s and PhD<br />

levels on machine-learning-based research topics applied to the<br />

financial services context. These projects will provide the basis for<br />

both academic research papers in local and international research<br />

journals, and the insights to drive the impactful application of<br />

machine learning techniques inside Momentum Investments.<br />

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

Momentum Investments<br />

Understanding investors<br />

Understanding the intricate dance of market dynamics and human<br />

behaviour is another focus area for the Research Hive. We delve<br />

26 www.bluechipdigital.co.za

INVESTMENT | Innovation<br />

BLUE<br />

CHIP<br />

deep into the realm of behavioural finance, peeling back the layers<br />

of psychology that influence investment decisions and which<br />

commonly lead to unintended results. Our mission is to decipher<br />

market insights through the lens of human behaviour.<br />

We recently held a ground-breaking conference on the future<br />

of behavioural finance in partnership with the CFA Society of<br />

South Africa and the Global Association of Applied Behavioural<br />

Scientists. Renowned experts in the fields of behavioural<br />

science and finance, investments, psychology and AI shed light<br />

on the ground-breaking possibilities that emerge when these<br />

domains intertwine. This event showed that the world is at an<br />

interesting juncture.<br />

On the one hand, we’re looking towards a human “empathy”<br />

economy where psychology plays a more important role in<br />

solving our problems. On the other hand, the era of artificial<br />

intelligence (AI) and quantum computing beckons, bringing<br />

with it tremendous opportunity and uncertainty. This remains<br />

an important focus area for us. In time, we will be able to make<br />

use of effective technology to nudge investors to make more<br />

informed decisions aligned with their long-term financial goals.<br />

Retirement reimagined<br />

A final example of the application of effective research is how<br />

Momentum Investments has reimagined retirement income<br />

planning with the recent launch of a significant enhancement<br />

to our living annuity. By allowing clients to hold a combination<br />

of a traditional (guaranteed) and living annuity, they must no<br />

longer choose between income protection and the growth of their<br />

retirement assets.<br />

However, determining the optimal balance between certainty and<br />

flexibility in retirement income is a complex problem. The Research<br />

Hive has worked alongside Momentum Wealth to model, build<br />

and introduce its Income Illustrator tool to assist financial advisors<br />

in determining the optimal retirement income solution for their<br />

clients. This tool uses a detailed simulation process developed by the<br />

Research Hive members for investment purposes to project future<br />

income and investment values under different return scenarios and<br />

allocations to the traditional annuity. This ensures that the uncertainty<br />

of future financial markets is considered in this decision.<br />

The examples of the Investment Research Hive output are a<br />

testament to the power of collective vision, relentless innovation<br />

and unyielding commitment to continuous improvement. By<br />

linking original, research-driven client insights, behavioural<br />

finance knowledge and investment management know-how,<br />

we’re creating a continuous loop of learning and improving<br />

inside our business. This is only possible with a dedicated research<br />

capability and a commitment to cross-business collaboration. With<br />

unwavering dedication to this goal and a collaborative spirit, we<br />

believe that we are shaping the future of investment management<br />

and advice today. <br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />

INVESTMENT | Offshore<br />

A leap forward into<br />

a new digital era<br />

In today’s fast-paced digital age, advisors and wealth managers<br />

require tools that seamlessly adapt to their evolving needs.<br />

The newly redesigned Momentum Wealth International<br />

website ticks this box with style. Its layout – easy to<br />

navigate yet sophisticated – puts a wealth of resources<br />

and information at the fingertips of users, regardless of<br />

the device they choose to use. The website heralds a new era<br />

in how financial advisors, wealth managers and clients in South<br />

Africa and beyond interact with digital platforms that facilitate<br />

offshore investing.<br />

The revamp goes beyond a mere facelift. It is a testament to<br />

countless hours of creative and technical toil by dedicated teams<br />

who envisioned a site that merges visual appeal with practical<br />

usability. The result: a website that not only catches the eye but<br />

also equips the hands of those navigating the complex and everchanging<br />

world of global investing.<br />

In the early 2000s, the Momentum Wealth International platform<br />

was launched in Guernsey as an offshore investment platform for<br />

South African and global clients. Investing through Momentum<br />

Wealth International gives clients a true offshore investment<br />

experience, diversification from local solutions with exposure to<br />

multiple global markets and<br />

solutions that offer estate<br />

planning and tax benefits.<br />

With the features and<br />

capabilities of the website<br />

after logging in, advisors<br />

and wealth managers can<br />

access client investment<br />

information, generate<br />

statements and contract<br />

notes, execute switches<br />

and even make additional<br />

investments – all at the click<br />

of a button. It’s a paradigm<br />

Fränzo Friedrich, Head of Marketing,<br />

Momentum Investments<br />

shift that promises to enhance how financial professionals<br />

manage their workload.<br />

Many users have already started exploring the new website<br />

and the feedback has been overwhelmingly positive. Those yet<br />

to discover the revamped momentum.co.gg can look forward<br />

to an intuitive, user-friendly experience that stands proudly in<br />

the industry.<br />

However, the launch of the redesigned website is not the<br />

finish line. Rather, it is a significant milestone in Momentum<br />

Wealth International’s ongoing journey of evolution. As the<br />

financial landscape continues to change, the commitment<br />

to continually adapt and innovate to meet the needs of the<br />

industry remains unwavering.<br />

The successful transformation of the website would not have<br />

been possible without the invaluable support, feedback and<br />

collaboration from our partners in South Africa and abroad. It<br />

is this spirit of partnership that will continue to fuel the future<br />

of Momentum Wealth International.<br />

The launch of the new look Momentum Wealth International<br />

website is more than a facelift – it’s a leap forward into a new digital<br />

era. It sets the tone for what users can expect from an investment<br />

platform committed to continual evolution and improvement.<br />

Welcome to the future with Momentum Wealth International.<br />

Let’s help you make your clients’ dreams and aspirations come<br />

to life. Because with us, investing is personal.<br />

28 www.bluechipdigital.co.za

Annual Refresher<br />

2024<br />

Cape Town 27 th February 2024<br />

Durban 29 th February 2024<br />

Gauteng 5 th March 2024<br />

Virtual 27 th March 2024<br />

For more information go to www.fpi.co.za or contact +27 (11) 470-6000<br />

6.5<br />



BLUE<br />

CHIP<br />

FPI | Financial Planner of the Year<br />


The FPI Financial Planner of the Year competition is renowned for its rigorous evaluation process that<br />

showcases the exceptional skills and abilities of the finalists. Lara Warburton, CFP®, stood out among a<br />

group of finalists including Thomas Brukman, CFP®, and Noel de Kock, CFP®, to secure the coveted title.<br />

Congratulations on your achievement, Lara! What does<br />

winning the award mean to you?<br />

The gala awards dinner is such a special occasion. The FPI pulls out<br />

all the stops to make it special, and many industry stalwarts and<br />

previous winners attend each year. It is a celebration of all that is<br />

good in our profession – young achievers excelling in their studies,<br />

meaningful contributors to our profession, practices that excel and<br />

of course, the FPI Financial Planner of the Year, which is the final<br />

award of the evening.<br />

Integral Wealth, the business I manage founded in 2016, was a<br />

finalist in the Professional Practice Award category, so I felt like a<br />

winner already, but nothing could have prepared me for when my<br />

name was announced as the winner. I felt so elated and excited.<br />

I was overwhelmed by all the people who came to personally<br />

congratulate me and the fuss everyone made about me, especially<br />

by many of the previous award winners who were there.<br />

Since then, I have been inundated with flowers, emails, calls<br />

and WhatsApps, I have received hundreds of LinkedIn contact<br />

requests and I can see that many of my clients see me in a different<br />

light. It has been quite overwhelming and incredibly exciting.<br />

I underestimated the warmth and recognition I have received<br />

from financial planners, as well as from industry players like the<br />

product and service providers we work with. Our profession is<br />

kind and gracious.<br />

What was your motivation for entering the award?<br />

When I entered the competition, I knew that winning the award<br />

would be the ultimate accolade for me as a financial planner. I have<br />

always strived to keep informed on changes in our profession and<br />

with best practices in all we do, and being a finalist or winning<br />

would bring a great deal of personal satisfaction. Winning the<br />

award would be an endorsement of excellence and the highest<br />

achievement possible. I know how highly regarded this award is in<br />

our profession, and I know many of the previous winners whom I<br />

respect tremendously. Winning the award also brings professional<br />

recognition – recognition from one’s peers is high praise indeed as<br />

they truly understand all the challenges we face.<br />

What has been the highlight of your career (besides winning<br />

the award)?<br />

There have been many highlights in my career regarding clients’<br />

lives that have changed, and the gratitude I have experienced<br />

Lara Warburton, CFP®, Managing Director, Integral<br />

Wealth Management<br />

30 www.bluechipdigital.co.za

FPI | Financial Planner of the Year<br />

BLUE<br />

CHIP<br />

Lelané Bezuidenhout with Noel de Kock, Lara Warburton and Thomas Brukman.<br />

I knew that winning the award<br />

would be the ultimate accolade<br />

for me as a financial planner.<br />

from them. My career started with me working for two unit trust<br />

companies, first at Investec and then at RMB. I was made a director<br />

of RMB Unit Trusts when I was 29 years old, and that was a career<br />

highlight for me at a young age. I always planned on being a<br />

corporate employee and entrepreneurship was not part of my<br />

plan. Almost eight years ago, circumstances forced me into starting<br />

my own business with some colleagues, and I am immensely proud<br />

of the business we have built, the procedures I have put in place<br />

and our business’ successes as we grow. No-one can prepare you<br />

for the challenges starting a business brings!<br />

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

accomplished financial advisor?<br />

It is hard to identify just one character trait as the most important,<br />

so I’ll start with a few. Listening well and hearing what we are<br />

being told is one of the most important. Each client has a different<br />

interpretation of their life events, and we cannot cloud our need<br />

to be objective with our own biases. Wanting to learn more and<br />

being able to admit when we are not experts and need additional<br />

resources is also important – to know what we do not know. I think<br />

humility speaks to both traits – our work is about our clients and<br />

not about us, and we need to remember their importance and not<br />

our own through the service we provide.<br />

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

Our profession is constantly changing and evolving, and it has<br />

come such a long way. The FPI has a long proud history of driving<br />

and recognising professionalism along international standards,<br />

and there are other professional bodies also driving best practices.<br />

It is pleasing to see young people joining the profession who<br />

want to achieve the CFP® designation and recognise the importance<br />

of high standards in our profession.<br />

I have been concerned about some of the products that are<br />

aggressively marketed, especially complicated products with<br />

hidden costs and exit penalties. It is good to note that the new<br />

Conduct of Financial Institutions (COFI) Bill is placing the onus on<br />

product providers to take more responsibility in this regard.<br />

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

to motivate change?<br />

The financial services industry in South Africa is world-class, and<br />

we rank highly in many areas as confirmed by the World Economic<br />

Forum global competitiveness reports. My biggest concern is<br />

that these services are not the experience of many under-served<br />

members of our communities. Poor financial education at school<br />

and low levels of literacy preclude many people from experiencing<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />

FPI | Financial Planner of the Year<br />

Winning the award is a<br />

great incentive and the<br />

competition process has<br />

been an incredible gift.<br />

the best of our profession. Low contributions usually have higher<br />

fees as many providers shy away from this sector.<br />

I believe every South African citizen and organisation should<br />

be focused on this transformation issue – for South Africa to<br />

prosper and thrive everyone needs to have access to banking,<br />

investments and life assurance that is appropriate and affordable.<br />

Many financial planners do pro bono work, and I would like to see<br />

this reach extended. Trust is low in this sector of the economy, it’s<br />

not a profitable sector if priced correctly for the consumer, but it is<br />

key to our political and economic stability and the future of South<br />

Africa. I am not sure how much scope I will have to actively drive<br />

this in 2024. It has always been my retirement plan to champion<br />

this cause.<br />

How should the profession improve clients’ experience of financial<br />

planning and ultimately their financial planning outcomes?<br />

We often respond to what clients ask for. We need to remember<br />

that many clients have a limited understanding of the scope of<br />

work we cover. Some still view us as product salespeople or<br />

investment allocators selecting portfolios. Many do not ask for<br />

more service than what they currently receive.<br />

Long-standing clients have annual reviews, but it is a good<br />

idea from time to time to review each client as if they were a<br />

new client. Start from scratch and review where they are now<br />

and if there are any improvements or changes to be made. We<br />

need to keep reminding our clients of the full range of services<br />

we provide, not just the ones they see at present. I have realised<br />

when doing this myself that many clients think our work only<br />

happens when we sit with them for a review. They don’t see what<br />

goes on in the background.<br />

Please share a message of motivation for those who have<br />

considered competing for the FP of the Year Award.<br />

I encourage every financial planning professional to enter this<br />

competition at least once. It has been the most remarkable<br />

opportunity to review how I work, and that has been invaluable.<br />

Enter this competition for yourself and view it as part of your<br />

personal growth as a professional. The process itself is extremely<br />

thorough and helps us to see our shortcomings and gaps. The<br />

panel interview with industry experts provided valuable insights<br />

into what we should be focusing on. Winning the award is a great<br />

incentive and the competition process has been an incredible gift.<br />

Nothing ventured, nothing gained. Step out of your comfort zone<br />

and enter the arena. It’s the only way to grow as a person and as<br />

a professional. <br />

32 www.bluechipdigital.co.za

Young Financial<br />

Planners Organisation <br />

Young Financial Planners Organisation<br />

Advancing Professional<br />

Financial Planning and<br />

Advice for All.<br />

The Young Financial Planners Organisation (YFPO), a member led FPI community,<br />

as part of its vision to make professional financial planning available to all South<br />

Africans.<br />

YFPO, is actively seeking under- 45ʼs who work as – or aspire to work as – financial<br />

planners, is about uniting and inspiring the young generation of CFP ® Professionals<br />

by bringing together FPI Student, Candidate and Professional Members under the<br />

age of 45 in the spirit of collective improvement.<br />

For more information go to www.fpi.co.za or contact +27 (11) 470-6000

BLUE<br />

CHIP<br />

FPI UPDATES | Awards<br />



The FPI hosted its highly anticipated annual gala awards evening in November 2023, a prestigious event<br />

recognising excellence in the financial planning industry.<br />

The culmination of the evening saw Lara Warburton, CFP®,<br />

emerge as the distinguished recipient of the FPI Financial<br />

Planner of the Year Award.<br />

The announcement took place at a gala dinner attended by<br />

esteemed financial luminaries, adding an element of glitz and<br />

glamour to the event. The Sandton Convention Centre served as<br />

the backdrop for this industry's flagship event.<br />

34<br />


FPI UPDATES | Awards<br />

BLUE<br />

CHIP<br />

In addition to Warburton’s triumph, the evening celebrated other<br />

notable achievements within the financial planning community:<br />

Harry Brews’ Award: Robert Macdonald, CFP®, was honoured<br />

for outstanding and dedicated service to both the FPI and the<br />

financial planning profession.<br />

FPI Approved Professional Practice of the Year Award: Crue<br />

Invest stood the test of time and was crowned as the professional<br />

practice of 2023. The finalists were Crue Invest, Veritas Wealth and<br />

Integral Wealth Management.<br />

Diversity and Inclusion Award: Olwethu Masanabo, CFP®,<br />

received this accolade for tireless efforts in fostering diversity<br />

within the financial planning profession.<br />

It Starts with Me Award: Kim Potgieter, CFP®, received recognition<br />

for her unwavering dedication to promoting the CFP® certification<br />

and global standards.<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />

FPI UPDATES | Awards<br />

Top Candidate Award: Stephan Lombard earned the prestigious<br />

title for surpassing all others in the FPI’s CFP® Professional<br />

Competency Examination.<br />

FPSB 25-Year Award: Dante de Gori, CEO of the Financial Planning<br />

Standards Board (FPSB), presented the award to FPI chairperson,<br />

Kirsty Scully, CFP®, and Lelané Bezuidenhout, CFP®, CEO, FPI on<br />

behalf of the FPI which is celebrating 25 years of CFP® certification<br />

in South Africa.<br />

The top Student Financial Plan Winners were from the University<br />

of Johannesburg (MSK Financial Services).<br />

36 www.bluechipdigital.co.za

FPI UPDATES | Awards<br />

BLUE<br />

CHIP<br />

The apex of the evening came with Lara Warburton, CFP®, being<br />

announced as the 2023 Financial Planner of the Year. The selection<br />

process involved a comprehensive evaluation, including the<br />

submission of a detailed financial plan based on a given case<br />

study, a thorough FPI Code of Ethics and Practice Standards panel<br />

audit, and a final panel interview assessing expertise on legislation,<br />

industry trends and technical information.<br />

Chris Whales, Sam Oliver and Gavin van der Merwe from <strong>Blue</strong><br />

<strong>Chip</strong> magazine.<br />

Kim Potgieter, Adele Whyte, FPI and Lelané Bezuidenhout.<br />

Left to right: Palesa Dube, 2022 FP of the Year, Lara Warburton and<br />

Lelané Bezuidenhout, FPI CEO.<br />

David Kop, CFP®, former director at FPI.<br />

Lelané Bezuidenhout, CEO of the FPI, commended all participants<br />

for their dedication and hard work, emphasising that success in<br />

the industry is a result of commitment, professionalism and hard<br />

work rather than luck.<br />

FPI chairperson, Kirsty Scully, CFP®.<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />

FINANCIAL PLANNING | Retirement<br />

Consider the pros and cons<br />

of life and living annuities<br />

By Kenny Meiring<br />

When you retire, there are several instruments that you<br />

can use to provide an income. Most people use only<br />

a living annuity, but just one of these instruments<br />

rarely meets a person’s needs optimally. The aim<br />

here is to receive a sustainable retirement income, pay as little<br />

income tax as possible and not lose money in the form of estate<br />

duty when you die. Most of my retirement income solutions use<br />

a combination of living annuities, life annuities and drawdowns<br />

from discretionary investments.<br />

Over the past few years, low interest rates and decent bond<br />

yields have resulted in annuity rates being extremely attractive<br />

and offering good value for money. I have used them to secure<br />

decent incomes for pensioners who were drawing down too much<br />

on their living annuities.<br />

Let me give you a sense of the difference in income that you<br />

can get by adding a life annuity into your investment mix. The<br />

recommended drawdown rate for a 76-year-old is 5.5%. Your<br />

Life annuities are designed to<br />

provide you with a pension<br />

for the rest of your life.<br />

38 www.bluechipdigital.co.za

FINANCIAL PLANNING | Retirement<br />

BLUE<br />

CHIP<br />

Converting your retirement<br />

assets into an income should<br />

not be done lightly.<br />

die early. When you have a living annuity, you have to invest<br />

as though you are going to live to 100, as you cannot afford<br />

to run out of money.<br />

• Life insurance companies can afford to be a little more<br />

aggressive about how they invest the money, as they have large<br />

pools to invest. As an individual, you cannot afford to take a<br />

chance with your retirement capital, so you need to invest more<br />

conservatively and give up some potential growth.<br />

Downside of life annuities<br />

Life annuities are designed to provide you with a pension for the<br />

rest of your life. Once they are set up, there is very little flexibility.<br />

You lock yourself into a particular income stream and that will be<br />

paid to you for the rest of your life.<br />

The other weakness of the annuity is that it is not designed to<br />

pay an inheritance. With the living annuity, there will often be an<br />

amount that your children can inherit once you and your spouse<br />

have died.<br />

This is not the case with a life annuity, as your children will stand<br />

a much lower chance of inheriting because your pension will have<br />

dried up.<br />

I like to use a life annuity in conjunction with a living annuity.<br />

The life annuity is used to cover your fixed costs such as your utility<br />

bills and medical aid, and the living annuity covers the rest.<br />

In the example below, if you bought a life annuity of<br />

R3-million and used R7-million to make up the balance of your<br />

income, you could significantly reduce your living annuity<br />

drawdown rate:<br />

Living annuity R46 000<br />

Life annuity with no annual increases R96 000<br />

Life annuity with 5% annual increases R70 000<br />

R10-million living annuity would thus give you a sustainable<br />

income of about R46 000 a month.<br />

A life annuity, on the other hand, would pay out a level amount<br />

of R96 500 a month for the rest of your life and your wife’s life. If<br />

you wanted an annuity that increased by 5% a year, the annuity<br />

would start at R70 000 a month.<br />

To summarise, we have:<br />

As you can see, the life annuity will provide a much higher<br />

income for you. There are a few reasons this is the case:<br />

• As life annuities are provided by life insurance companies,<br />

they make use of life expectancy tables. The people who live<br />

beyond the life expectancy level are subsidised by those who<br />

Having a lower drawdown rate can increase the chances of the<br />

capital value of your living annuity increasing over time. Not<br />

only will this give you greater financial security, but you will<br />

also increase the chances of your children inheriting something<br />

once you and your spouse have died.<br />

Converting your retirement assets into an income should<br />

not be done lightly.<br />

I would recommend that you chat with a financial advisor, who<br />

can advise you on the right combination of life and living annuities. <br />

This story first appeared in Daily Maverick.<br />

www.bluechipdigital.co.za<br />


We believe<br />

people deserve<br />

a<br />

retirement<br />

Just SA offers guaranteed lifetime income<br />

solutions providing retirees with financial<br />

certainty and protection from outliving<br />

their assets.<br />

We partner with best-of-breed asset managers<br />

and administrators to provide an enhanced value<br />

proposition to meet the different needs of<br />

South African retirees.<br />

Scan the QR code or visit justsa.co.za for more information<br />

Just Retirement Life (South Africa) Limited is a licensed life company, regulated by the Prudential Authority of the South African<br />

Reserve Bank and the Financial Sector Conduct Authority as an authorised financial services provider (FSP number 46423). Just<br />

SA is a wholly owned subsidiary of Just Group Plc, one of the UK’s leading providers of retirement financial solutions.

FINANCIAL PLANNING | Retirement<br />

BLUE<br />

CHIP<br />

Eliminating the role of luck in<br />

retirement income planning<br />

When it comes to retirement income planning, some<br />

people may rely on a little bit of knowledge and a<br />

lot of luck to get them through. This contribution<br />

of luck is not something that is regularly discussed<br />

as, after all, if the ability of a retirement portfolio to produce a<br />

comfortable lifetime income is simply a matter of luck, clients<br />

might be forgiven for questioning the role of a financial advisor.<br />

The truth is that luck can often play a role – but it could be<br />

either positive or negative. The question is, can it be eliminated?<br />

Defining and quantifying luck<br />

Secular market trends (or waves) can set retirees up for a happy<br />

retirement with enough money to last a lifetime, or an unhappy<br />

retirement where their portfolio is depleted prematurely. Secular<br />

The truth is that luck can often<br />

play a role – but it could be<br />

either positive or negative.<br />

should be designed to last as long as the individual client’s life<br />

expectancy (which is unknown), and a life annuity is based on<br />

average life expectancy. And if clients are lucky enough to live<br />

well beyond the average, they continue to receive an income, no<br />

matter how long they live.<br />

Investing solely in a living annuity is only appropriate in some<br />

circumstances. Clients who have not saved enough may hope they<br />

are lucky enough to grow their capital in the decumulation phase<br />

– enough so to last a lifetime. But relying on luck is not a strategy.<br />

In fact, when it comes to retirement income the strategy should<br />

be to eliminate the reliance on luck altogether. <br />

[1]<br />

According to the Financial Sector Conduct Authority’s Draft Conduct Standard for proposed<br />

maximum sustainable drawdown rates for default living annuities, if a 65-year-old male wants a<br />

sustainable income that covers his essential expenses for life, the maximum he should draw from<br />

his capital is 5.5% a year. The figure for a 65-year-old female is 5%, as women tend to live longer.<br />

waves are long-term market trends that can last as long as 20 years<br />

and can be bull, bear or sideways trends.<br />

Due to the sequence of returns risk, the returns experienced<br />

early in retirement have a disproportionate impact on the overall<br />

outcome. If one is lucky, the timing of retirement is at the beginning<br />

of a secular bull run. But if unlucky, it’s likely a retiree could run out<br />

of money. In South Africa, for example, retiring five years ago, but<br />

drawing down too much income, could result in trouble.<br />

Eliminating luck<br />

Even if a client has saved a substantial sum that should be<br />

more than sufficient to fund a comfortable retirement, if their<br />

withdrawal rate rises above a sustainable level [1] , then luck plays<br />

an increasingly important role. Eliminating luck, then, is strongly<br />

related to keeping a tight rein on withdrawals (also referred to<br />

as drawdowns).<br />

Even asset allocation, a main contributor to the success of an<br />

accumulation portfolio (generally the working years), doesn’t<br />

necessarily help, as it starts to play less of a role in decumulation<br />

portfolios (retirement years).<br />

For pooled portfolios like life annuities, the dynamics are different.<br />

The two main reasons for this are, firstly, a living annuity must<br />

include greater assets to offset the luck factor, whereas with a life<br />

annuity, the luck factor is minimised. Secondly, a living annuity<br />

Bjorn Ladewig, Head of Distribution, Just SA<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />

INVESTMENT | Exchange-traded products<br />

ETFs, ETNs and<br />

AMCs: is this the<br />

future of investing?<br />

Recent developments in the market for exchange-traded products<br />

are providing access to a whole new world of investment opportunities<br />

for financial advisors and their clients.<br />

As these product innovations happen, further innovations<br />

at an advice level will become possible. Effectively<br />

navigating this new order is going to be challenging<br />

for financial advisors.<br />

ETPs: the new order<br />

The Johannesburg Securities Exchange (JSE) has recently allowed<br />

the listing of a range of new exchange-traded products (ETPs).<br />

Individuals can now buy and sell portfolios through a single listed<br />

investment product across multiple asset classes.<br />

This innovation has had two key effects: firstly, investors can<br />

now access via the JSE what used to be only available via mutual<br />

funds accessed through Linked Investment Services Providers<br />

(LISPs). Secondly, the range of investment opportunities available<br />

has also expanded rapidly. You can now get access to previously<br />

unavailable investments such as individual global stocks (eg<br />

Amazon or Alphabet), new indices (such as the Helios Space<br />

Index) and even actively managed diversified commodity funds<br />

(such as the one offered by Coherent Commodities in partnership<br />

with UBS). These choices were not available via the mutual fund<br />

channel, nor is it likely that they would be.<br />

This range of additional choices brings opportunities to lower<br />

costs and increase solution customisation – but also brings<br />

complexity from an advice perspective. For active investors, ETPs<br />

offer the advantage of intra-day pricing and trading vs the daily<br />

price and trade settlement opportunity offered by mutual funds.<br />

Exchange-traded Funds<br />

These securities track the performance of a specified index such as<br />

a portfolio of shares, bonds or single commodities. According to<br />

the JSE, at the end of September, there were 98 exchange-traded<br />

funds (ETFs) worth about R136-billion. Some of the most popular<br />

examples include the NewGold and Top 40 ETFs.<br />

The defining characteristic of an ETF is that the index (and thus<br />

the constituents) is defined in terms of a pre-defined set of rules<br />

reflecting a set of desired characteristics. As these rules are defined<br />

in advance and implemented mechanically, they are well-suited<br />

to investors who want the specific characteristics embodied in the<br />

index design at a cheap total cost.<br />

For example, currently, the largest equity ETF by value tracks<br />

the JSE Top 40 index, which gives an investor access to the returns<br />

of a portfolio of the 40 largest listed companies on the JSE. It is<br />

important to note that these products are not limited to marketcapitalisation-based<br />

indices. You can get access to “active” or<br />

“smart” indices. As these ETFs track the performance of underlying<br />

assets or indices, they follow a passive investment strategy, usually<br />

at a very low cost to investors.<br />

Exchange-traded Notes<br />

Exchange-traded Notes (ETNs) are fundamentally similar to ETFs<br />

but differ in one key dimension: they are notes (or debt obligations)<br />

issued by a regulated party, usually a bank. This means that there is<br />

credit risk – if the bank goes under, the investors must get in line<br />

with other creditors. It also means that they are fixed term – they<br />

expire after a period.<br />

ETNs provide the holder with the returns to the underlying<br />

index which is specified in the ETN itself. This structure gives it<br />

great flexibility – the underlying index can be created from a<br />

combination of literally anything that is listed (and thus can be<br />

objectively valued).<br />

As of the end of September 2023, there were 74 ETNs listed on<br />

the JSE, with the majority providing access to specialised global<br />

42 www.bluechipdigital.co.za

INVESTMENT | Exchange-traded products<br />

BLUE<br />

CHIP<br />

All this opportunity comes with<br />

the cost of more complexity.<br />

equity indices. Like ETFs, the underlying index is predefined and<br />

fixed and thus is a fundamentally passive investment in nature.<br />

Actively Managed ETFs<br />

An Actively Managed ETF (AMETF) is a new ETP that offers<br />

exposure to a Collective Investment Scheme (CIS) portfolio, in<br />

other words, one which is actively managed like a traditional<br />

investment strategy. These provide access to effectively the same<br />

investment solutions that are currently available via LISPs – but are<br />

now available through the JSE. The underlying investment product<br />

must be consistent with existing regulatory requirements of the<br />

Collective Investment Schemes Control Act (CISCA).<br />

The AMETF universe is currently relatively small in South Africa,<br />

but more and more investment companies are planning to list<br />

their current funds via AMETFs. Dimensional Fund Advisors have<br />

recently converted all their mutual funds into ETFs – a value worth<br />

USD44-billion. The primary reason for the change is the improved<br />

access to investors offered by a public exchange.<br />

personalisation of advice and the design of investment solutions.<br />

Roland Rousseau of NeoBeta in a recently published report points<br />

out that these innovations can lead to a completely different<br />

advice environment where the key skills are, firstly, understanding<br />

your client’s personal characteristics; and, secondly, developing an<br />

appropriate solution for their individual needs across this wider and<br />

more accessible investment universe.<br />

All this opportunity comes with the cost of more complexity.<br />

Advisors will, firstly, need to have the skills (or access to the skills) and<br />

technology to manage this new world. For starters, understanding<br />

your client objectively and more accurately will require the use of more<br />

valid and reliable measures of relevant psychological characteristics.<br />

The Money Fingerprint developed by Paul Nixon, head of behavioural<br />

finance at Momentum Investments, in conjunction with the University<br />

of Pretoria, is an excellent example of this type of innovation. Secondly,<br />

the development of individualised investment solutions will require a<br />

significant amount of bespoke modelling and reporting capabilities.<br />

Globally, there are examples of such platforms which allow for such<br />

customisation of investment solutions. Rousseau cites the example of<br />

the Aladdin platform developed by BlackRock. Locally these do not<br />

currently exist but are likely to be offered soon as the benefits of these<br />

ETP innovations are recognised.<br />

In short, the innovations we see in the ETP world are signifiers<br />

of a new, more flexible world of (potentially) cost-efficient, hyperpersonalised<br />

investment solutions. However, access to these<br />

opportunities on its own is not sufficient – you need to know your<br />

client well enough to understand their unique attitudes and needs,<br />

and then have the right technology to design and manage an<br />

increasingly wide range of solutions that are becoming possible now.<br />

Investment advice is going to be a lot more than choosing the right<br />

fund for your client. <br />

Actively Managed Certificates<br />

Actively Managed Certificates (AMCs) have the same legal structure<br />

as ETNs (notes issued by a bank) but do not have a fixed underlying<br />

index. They provide the returns to an actively managed underlying<br />

portfolio. Conceptually they represent a similar alternative to the<br />

AMETF, but do not have the same regulatory restrictions and thus<br />

can offer access to a wider range of underlying portfolios.<br />

What opportunities and challenges does this new world offer<br />

financial advisors?<br />

Clearly, these innovations bring additional investment choices<br />

which need to be managed. They also bring more opportunity for<br />

Evan Gilbert, Research Strategist, Momentum Investments and<br />

Research Professor, Stellenbosch University<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />


44 www.bluechipdigital.co.za


BLUE<br />

CHIP<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />


Worth its weight in gold<br />

A pioneer in the South African exchange-traded funds industry, Absa Corporate and Investment Bank’s<br />

exchange-traded products business was established in early 2000 to provide investors with passive investment<br />

solutions by using exchange-traded products as tools or building blocks. <strong>Blue</strong> <strong>Chip</strong> speaks to Michael Mgwaba,<br />

who heads up the ETP business at Absa.<br />

Please share your career trajectory to your current position.<br />

I have more than 17 years of experience in the exchange-traded<br />

product (ETP) industry, starting in the middle office and working<br />

my way up to head the ETP business and as CEO of one of the<br />

largest exchange-traded fund (ETF) issuers in Africa, the NewGold<br />

<strong>Issue</strong>r (RF) Limited.<br />

In your role, you are responsible for the development and<br />

origination of innovative funds and solutions for retail and<br />

institutional investors. Are there any new products for 2024<br />

in the pipeline?<br />

Our team is working on a few products/solutions that in our view<br />

can be considered viable investment tools for various investors<br />

in their portfolio construction. We can provide more detailed<br />

information when cleared with the listing authority.<br />

Please tell us about Absa’s ETP business.<br />

The Absa ETP business established itself as the market leader in<br />

precious metals and fixed-income ETFs and has been the largest<br />

issuer of ETPs in the market for the better part of the last two<br />

decades. Some of its flagship products are NewGold which has<br />

multiple listings across Africa and NewPlat which at some point<br />

became the world’s largest platinum ETF. The business has won<br />

many accolades over the years, it has expanded its offering to<br />

include Actively Managed Certificates (AMCs) and today its focus is<br />

on products linked to precious metals, global currencies and more.<br />

NewGold ETF is one of the simplest and most cost-efficient<br />

methods for investors to invest directly in actual gold. How so?<br />

NewGold was one of the first few gold ETFs launched globally in<br />

2004 and the first of its kind in Africa. It started off charging the<br />

same investment fee as some of the large global gold ETFs at 0.40%<br />

annually. To align itself with its mission to provide an effective<br />

way to own gold and democratise its investment, Absa decided<br />

to reduce its cost to investors significantly, ensuring that the man<br />

on the street can also enjoy the investment benefit associated with<br />

investing in gold<br />

Today, NewGold is one of the lowest-cost gold ETFs in the world<br />

at 0.30% annually and currently, there are no similar products in<br />

South Africa whose effective charge is lower than that of NewGold.<br />

The use of NewGold by investors has also evolved over the years,<br />

whereas in the past it was mainly acquired by long-term investors<br />

who wanted to benefit from sustainable returns. Today, we also<br />

see tactical investors who want to<br />

benefit from short-term trends like<br />

changes in interest rates, currency<br />

fluctuations, etc. Other investors<br />

use it to park excess cash while in<br />

search of good opportunities in the<br />

market and sell it later.<br />

Why gold?<br />

Gold has historically demonstrated<br />

the following attributes: a superior<br />

store of value, especially during<br />

times of high inflation and currency<br />

volatility. It has proven to have a low<br />

to negative correlation to most asset<br />

classes, making it one of the most<br />

effective diversifiers in a traditional<br />

60/40 portfolio. Recent analysis done<br />

by the World Gold Council suggests<br />

that adding gold into a diversified<br />

Michael Mgwaba, Head of<br />

ETP Business, Absa<br />

portfolio investing in global assets can improve risk-adjusted<br />

returns. It is rare to find all these attributes in one asset. These<br />

attributes stem from the fact that gold has both industrial and<br />

investment use and its supply and demand is diverse.<br />

Please tell us about the current ETP landscape.<br />

South Africa’s ETP industry has grown tremendously over the<br />

years, especially around the number of products it offers to the<br />

market, diverse asset classes that are offered via ETPs and various<br />

investment strategies that investors today can access by investing<br />

in ETPs. It has moved from an industry associated with passive<br />

investment strategies to one that provides both active and passive<br />

strategies/solutions. Today its offering is used by institutional<br />

investors in portfolio construction and core-satellite strategies<br />

as well as by retail investors as building blocks. The industry has<br />

evolved over the past 22 years and its offerings now include AMCs<br />

and Actively Managed ETFs.<br />

What advice would you give investors in terms of ETPs?<br />

With markets very volatile and geopolitical tension perpetuating<br />

an uncertain future, diversification becomes more important than<br />

ever. ETPs are an efficient and cost-effective way to achieve it. Gold<br />

can act or be considered as insurance in your portfolio. <br />

46 www.bluechipdigital.co.za

Financial Planning Institute of Southern Africa<br />

Become a CERTIFIED<br />


professional<br />

The CERTIFIED FINANCIAL PLANNER ® professional designation is<br />

internationally recognised as the standard for financial planning professionals<br />

which sets them apart.<br />

The status gives consumers confidence that the financial planner they are dealing with is suitably qualified<br />

to give trusted advise to assist them with their varied financial planning needs. Consumers are assured<br />

that a CFP ® professional remains up to date with developments in their profession to better serve the<br />

needs of their clients.<br />

Below are just some of the main secondary member benefits of being a<br />

CFP ® professional with the FPI<br />

• Commissioner of Oath status<br />

• Designation recognized by South African Qualifications Authority (SAQA) & registered on the National<br />

Learning Database<br />

• Apply with FPI to become a SARS Tax Practitioner<br />

In addition to this, the CFP ® designation has been recognized by the FSCA in their proposal as the only<br />

mark to currently meet the standard and will be limited to a Financial Planner title of an adviser holding a<br />

professional designation.<br />

CFP®, CERTIFIED FINANCIAL PLANNER® and are trademarks owned outside the U.S. by Financial Planning Standards Board Ltd. The Financial Planning Institute of Southern Africa is the<br />

marks licensing authority for the CFP® marks in South Africa through agreement with FPSB. Please visit www.fpsb.org to learn more about FPSB and the affiliate countries.

BLUE<br />

CHIP<br />


The arithmetic is not in<br />

active funds’ favour<br />

Morningstar reported that a third of European active<br />

equity managers outperformed the average passive<br />

fund in the one year to the end of June 2023.<br />

However, in the last decade, only 17.1% of active<br />

equity and 23.1% of bond managers outperformed their passive<br />

peers, highlighting the compelling value proposition of indexbased<br />

funds. Global fund flows show more investors than ever<br />

are choosing indexation strategies.<br />

Fund flows tell the story<br />

Morningstar makes it clear that while active managers may have<br />

had success recently in the volatile global market, the long-term<br />

picture shows that index funds are more consistent performers. Its<br />

study of almost 26 000 active and index funds indicated that funds’<br />

survival is tied to their success and, typically, index funds outlast<br />

their active counterparts.<br />

Here is further insight into the explosive growth of indexation<br />

or rules-based strategies:<br />

• Over the last 14 years, index-based funds absorbed 65% of net<br />

global flows [1] .<br />

• According to Morningstar, exchange-traded funds (ETFs) in<br />

South Africa now account for 6.3% of market share, and unit<br />

trusts are at 7.5%. Among high equity balanced funds, the assets<br />

under management (AUM) of rules-based or indexed balanced<br />

funds sit at 8.2% but they have attracted an outsized 57.1% of<br />

net flows over the last 12-months within the ASISA South African<br />

Multi-Asset High Equity category [2] .<br />

• Satrix ETF AUM across linked-investment service provider<br />

(LISP) platforms have grown more than six-fold in the past<br />

three years [3] .<br />

The arithmetic of active management<br />

The Arithmetic of Active Management paper by Nobel Prize winner<br />

William F Sharpe shows that for every dollar that outperforms<br />

the market benchmark, another dollar will underperform; it’s a<br />

zero-sum game among all market participants, before costs.<br />

In practice, however, all investing and investment funds incur<br />

costs (from trading and management), which means that the<br />

average fund underperforms the market benchmark, leaving a<br />

minority of funds able to outperform over a given period.<br />

The crux<br />

Active managers’ value should be highest when opportunities to<br />

differentiate are the strongest.<br />

Historically, however, this has not been the case. For a South<br />

African multi-asset manager, the period after 2020 coincided with<br />

a time when getting active calls right was the most profitable<br />

in our history. Despite this, according to Bloomberg and Satrix,<br />

the weighted average 12-month rolling returns of rules-based<br />

balanced funds have outperformed the median rolling returns of<br />

active managers 73% of the time, since 2020. This is also not a new<br />

phenomenon: over the 10 years since the Satrix Balanced Index<br />

Fund’s inception, it has outperformed its active peers over <strong>90</strong>% of<br />

the time on a rolling three-year basis.<br />

48 www.bluechipdigital.co.za


BLUE<br />

CHIP<br />

Kingsley Williams, Chief Investment Officer, Satrix*<br />

Active management<br />

has an important price<br />

discovery role to play.<br />

This suggests that either active managers are not capitalising on<br />

available opportunities to differentiate themselves using active<br />

tactical decisions to compensate for higher fees, or that making<br />

the correct tactical calls is exceedingly hard to do consistently. The<br />

real reason is probably a combination of both.<br />

Man and machine<br />

Active management has a very important price discovery role<br />

to play, and this is something that vanilla index solutions are<br />

ill-equipped to do. Active managers should be able to identify<br />

opportunities that may not be obvious from quantitative measures<br />

alone. This means that indexation can never fully replace active<br />

management, nor should it aspire to do so.<br />

Now, in an age of AI, prevailing prices will increasingly accurately<br />

reflect available information, eroding easy opportunities for active<br />

differentiation. Active versus passive is a dead concept. A blend<br />

of man and machine, or active and indexation, should be the best<br />

strategy going forward. The numbers are too clear to ignore. <br />

*Satrix is a division of Sanlam Investment Management.<br />

[1]<br />

Nedgroup Investments Core Chartbook 2023 | Investment<br />

Company Institute<br />

[2]<br />

Morningstar & Satrix, 31 December 2023<br />

[3]<br />

Satrix, 31 December 2023<br />

CIS disclosure<br />

Satrix Investments (Pty) Ltd is an approved FSP in terms of the Financial Advisory and Intermediary Services Act (FAIS). The information does not constitute advice as contemplated in FAIS. Use or rely on this<br />

information at your own risk. Consult your Financial Adviser before making an investment decision. Satrix Managers is a registered Manager in terms of the Collective Investment Schemes Control Act, 2002.<br />

While every effort has been made to ensure the reasonableness and accuracy of the information contained in this document (“the information”), the FSPs, their shareholders, subsidiaries, clients,<br />

agents, officers and employees do not make any representations or warranties regarding the accuracy or suitability of the information and shall not be held responsible and disclaim all liability for any<br />

loss, liability and damage whatsoever suffered as a result of or which may be attributable, directly or indirectly, to any use of or reliance upon the information.<br />

Satrix Managers (RF) (Pty) Ltd (Satrix) is a registered and approved Manager in Collective Investment Schemes in Securities. Collective investment schemes are generally medium- to long-term investments.<br />

With Unit Trusts and ETFs, the investor essentially owns a “proportionate share” (in proportion to the participatory interest held in the fund) of the underlying investments held by the fund. With Unit<br />

Trusts, the investor holds participatory units issued by the fund while in the case of an ETF, the participatory interest, while issued by the fund, comprises a listed security traded on the stock exchange.<br />

ETFs are index-tracking funds, registered as a Collective Investment and can be traded by any stockbroker on the stock exchange or via Investment Plans and online trading platforms. ETFs may incur<br />

additional costs due to being listed on the JSE. Past performance is not necessarily a guide to future performance and the value of investments/units may go up or down. A schedule of fees and charges,<br />

and maximum commissions are available on the Minimum Disclosure Document or upon request from the Manager. Collective investments are traded at ruling prices and can engage in borrowing and<br />

scrip lending. Should the respective portfolio engage in scrip lending, the utility percentage and related counterparties can be viewed on the ETF Minimum Disclosure Document.<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />

PRACTICE MANAGEMENT | Technology<br />

The growing threat of cybercrime<br />

Cybercrime has emerged as a significant threat in today’s digital age, affecting both individuals and<br />

corporations on a global scale. In this article, we delve into the intricate world of cybercrime.<br />

At its core, cybercrime encompasses a wide range of<br />

illicit activities that exploit vulnerabilities in computer<br />

networks, software and online platforms. These activities<br />

are not limited to lone hackers but often involve organised<br />

groups and even state-sponsored actors, such as reported cases of<br />

North Korea’s cyber espionage on the US. Cybercriminals target<br />

individuals, organisations or even governments.<br />

The most common forms of cybercrime can be categorised as<br />

phishing, ransomware, hacking/identity theft and data breaches.<br />

The methods used are constantly adapting and getting more<br />

sophisticated over time. Let’s take a closer look at some of them:<br />

• Phishing. In this scheme, cybercriminals impersonate trusted<br />

entities, such as banks or technology companies, sending<br />

fraudulent emails, messages or websites to deceive individuals<br />

into divulging sensitive information. Phishing attacks persist<br />

because of their relative simplicity and high effectiveness.<br />

• Ransomware. Typically, infected emails and attachments are<br />

sent to random targets. If an individual then clicks on an infected<br />

link or attachment from the email, this malicious software then<br />

encrypts a victim’s data, rendering it inaccessible. The attacker<br />

then demands a ransom, typically in cryptocurrency, in exchange<br />

for the decryption key. Ransomware attacks have been on the<br />

rise due to the potential for significant financial gain.<br />

• Identity theft. Cybercriminals steal personal information,<br />

such as identity numbers, financial records or driver’s licence<br />

details to assume the identity of their victims. This information<br />

is often used for fraudulent activities, including opening<br />

accounts, making purchases and committing financial fraud.<br />

The consequences can include substantial financial losses and<br />

damage to one’s reputation.<br />

The impact of cybercrime<br />

The repercussions of cybercrime are far-reaching. Individuals<br />

can suffer financial losses, exposure to personal information<br />

and emotional distress. In contrast, corporations face significant<br />

financial setbacks, reputational damage, loss of intellectual<br />

property and potential legal issues. The 2021 Cybersecurity Risk<br />

Survey by Deloitte revealed that 40% of respondents experienced<br />

at least one cybersecurity incident in the past year, highlighting<br />

the pervasive nature of this ominous menace.<br />

The scale of the issue<br />

A study that was commissioned by the cybersecurity company<br />

Surfshark identified South Africa as the fifth-most affected country<br />

in the world in terms of cybercrime. The widely quoted figure of<br />

R2.2-billion lost annually to cybercrime in South Africa comes from<br />

a 2013 report by the South African Banking Risk Information Centre<br />

(Sabric). Reports from BusinessTech indicate a very concerning<br />

356% increase in impersonation fraud between April 2022 and<br />

April 2023. In addition, a cybercrime report by Interpol discovered<br />

50 www.bluechipdigital.co.za

PRACTICE MANAGEMENT | Technology<br />

BLUE<br />

CHIP<br />

One of the most targeted<br />

sectors within South Africa is<br />

the financial services industry.<br />

that more than 230-million cyber threats were detected in South<br />

Africa in 2021, the highest number on the continent. Some more<br />

startling statistics are that cybercrime is more profitable than the<br />

global drug trade, as well as costing more per year than all natural<br />

disasters combined. If it were a global economy (measured in GDP),<br />

it would rank as the third largest after the USA and China. Chart 1<br />

illustrates how massive the scale of the problem is and just how<br />

costly cybercrime will be in the coming years.<br />

Chart 1. Estimated cost of cybercrime worldwide (in trillion US<br />

dollars) as of November 2022<br />

Source: Statista Technology Outlook, National Cyber Security<br />

Organizations, FBI, IMF<br />

Targeting critical infrastructure<br />

It is essential to acknowledge that cyber threats transcend national<br />

borders. Cybercriminals operate on a global scale and trends in<br />

attack techniques and targets often cross geographical boundaries.<br />

Understanding these global dynamics is crucial for individuals and<br />

organisations seeking to elevate their cybersecurity defences.<br />

Cybersecurity has become paramount in safeguarding critical<br />

infrastructure, including pipelines, energy grids, water distribution<br />

and food-processing plants.<br />

Notable global cybercrime incidents<br />

• SolarWinds Hack (2020). A highly sophisticated supply chain<br />

attack compromised numerous US government agencies and<br />

private companies, with cybercriminals inserting malicious code<br />

into software updates for prolonged access to sensitive data.<br />

• Colonial Pipeline Ransomware Attack (2021). This major<br />

fuel supplier in the US fell victim to a ransomware attack that<br />

demanded $4.4-million in cryptocurrency, leading to fuel<br />

shortages and economic disruption.<br />

One of the most targeted sectors within South Africa is the financial<br />

services industry. This makes intuitive sense as companies<br />

working in this industry have access to confidential information<br />

and documents related to client information such as ID numbers,<br />

bank account details, etc. All of these are valuable details to be<br />

used by cybercriminals to perform their nefarious activities such<br />

as fraud, setting up false bank accounts and the list goes on.<br />

Think of all the emails and text messages you receive regularly<br />

from your “colleagues” or “clients”. These relentless attempts<br />

by cybercriminals aim to gain access to information from<br />

unsuspecting victims. Individuals can’t afford to let their guard<br />

down, as the consequences of a single lapse in concentration<br />

can be dire.<br />

Here are some local examples of just how serious the<br />

consequences can be:<br />

Notable South African cybercrime incidents<br />

• A ransomware attack took down a R2-trillion investment<br />

administration company for five days: Even though the money<br />

was not at risk, the outage prevented the financial services<br />

provider’s clients from processing investment-related instructions<br />

or offering other services. Its asset management clients include<br />

Old Mutual, Sanlam Investments and Futuregrowth.<br />

• Department of Justice hit with ransomware attack: The<br />

department said the attack led to all its information systems<br />

being encrypted and unavailable to both internal employees as<br />

’<br />

well as members of the public. All electronic services provided<br />

by the Department including issuing letters of authority, bail<br />

services, email and the departmental website were affected.<br />

Countering cybercrime<br />

Effectively countering cybercrime<br />

necessitates proactive measures, including:<br />

• Maintaining strong cyber hygiene, such as<br />

regular software updates, strong passwords<br />

and two-factor authentication. Investing<br />

in cybersecurity software, encompassing<br />

firewalls, intrusion detection systems and<br />

antivirus solutions.<br />

• Continuous education and training to<br />

empower employees and users with<br />

cybersecurity best practices.<br />

• Implementing advanced threat<br />

detection systems and active<br />

network monitoring for swift<br />

threat identification.<br />

Investing in the latest and<br />

most advanced cybersecurity<br />

Greig Phillips, Investment<br />

Specialist, Fundhouse

BLUE<br />

CHIP<br />

PRACTICE MANAGEMENT | Technology<br />

Chart 2. PwC survey question: How exposed do you believe your company will be to the following threats in the next 12 months<br />

and five years?<br />

Source: PwC’s 26th Annual Global CEO Survey Investment opportunities in cybersecurity<br />

programmes in the market is of the utmost importance. It is one<br />

of the best ways in which to combat any potential risks. This is a<br />

high priority for global business leaders.<br />

According to PWC’s 26th Annual Global CEO survey in<br />

2023 which spanned 4 410 chief executives, cybercrime was<br />

highlighted as a greater potential risk than climate change and<br />

an equal risk to geopolitical conflicts over the next five years. It<br />

underscores how seriously top business leaders globally are taking<br />

this endemic problem.<br />

Investment opportunities in cybersecurity<br />

Some individuals have taken advantage of the investment case for<br />

cybersecurity and explored opportunities among the top companies<br />

within this sector, including Palo Alto Networks Inc, Fortinet Inc<br />

and Zscaler Inc among others. The need for and importance of<br />

these types of companies will only be<br />

increasing in years to come.<br />

Chart 3, also from the recent PWC<br />

Global CEO survey, underpins what can<br />

be considered as an investment case<br />

for cybersecurity companies. Almost<br />

half of CEOs surveyed said that they<br />

would be increasing their spending on<br />

cybersecurity and data privacy in the<br />

upcoming year.<br />

financial loss or invasion of privacy. As technology and AI continue<br />

to advance, cybercriminals become more sophisticated, making<br />

personal vigilance essential.<br />

Understanding and analysing the potentially far-reaching<br />

impact on the investment landscape is also becoming more<br />

and more prevalent. While there can be significant growth<br />

opportunities within cybersecurity-linked sectors, analysing the<br />

impact of data breaches on all businesses and how they can<br />

result in significant financial losses, reputation damage and legal<br />

liabilities is also key. The resilience of a company’s cybersecurity<br />

measures is fast becoming a pivotal factor in investment decisions,<br />

determining who is better positioned to mitigate risks and<br />

safeguard their financial performance. As technology evolves, so<br />

will the sophistication of cybercrime, intensifying the importance<br />

of these considerations. <br />

Chart 3. PwC survey question: Which of the following actions, if any, is your company<br />

considering to mitigate against exposure to geopolitical conflict in next 12 months?<br />

Why cybersecurity’s multifaceted<br />

significance is important<br />

From a personal perspective, being<br />

aware of cybersecurity is crucial as our<br />

digital lives are increasingly intertwined<br />

with personal information and assets.<br />

Cyberattacks can lead to identity theft,<br />

Source: PwC’s 26th Annual Global CEO Survey<br />

52 www.bluechipdigital.co.za

PRACTICE MANAGEMENT | Technology<br />

Become a<br />




professional<br />

Who should apply?<br />

For individuals who are qualified and have one<br />

year or more relevant financial services<br />

experience. FPI offers the REGISTERED<br />


that you can differentiate yourself through the FPI<br />

Code of Ethics and Professional Standards.<br />

The Criteria<br />

This membership type is for an individual who has:<br />

Completed a level NQF5 (old) or level NQF6 (new)<br />

qualification;<br />

Has one (1) year relevant financial services<br />

experience or more;<br />

Has completed the professional competency<br />

examination (written or exempt*); and<br />

Has agreed to abide by the FPI Code of Ethics and<br />

Professional Standards.<br />

Exemption* :Honours/ Post Graduate Diploma In Financial Planning ;BCom in Financial Planning; BCom Finance;<br />

Certificates in financial planning & Wealth Management obtained from Milpark Education; Moonstone (MBSE);<br />

SANLAM Connect Academy; Universities- Academia, Free State, Johannesburg, Kwa-Zulu Natal, Stellenbosch,<br />

Johannesburg, NNMU.<br />

businessdevelopment@fpi.co.za | +27 11 470 6000 | www.fpi.co.za

BLUE<br />

CHIP<br />

INVESTMENT | Economy<br />

Could smaller companies<br />

have a bright spot despite<br />

a gloomy environment?<br />

Investing in smaller capitalisation (small cap) stocks when<br />

economic conditions are tough can feel uncomfortable. Yet,<br />

history tells us that this can be a good time to start considering<br />

whether these companies deserve a place within a diversified<br />

portfolio. We analysed data from the past five decades to get some<br />

insights from history to test this thought.<br />

The stock market gazes into the crystal ball<br />

One of the best leading indicators is the stock market itself. This is<br />

because investors are not only concerned with today’s headlines but<br />

also how the future will unfold. Investors anticipate how the future<br />

might unfold and then transact in company shares accordingly,<br />

driving the share price up or down in advance of actual news. This<br />

means – for example – when a company announces how much it<br />

has grown its sales by, the share price might not change on that<br />

day if the company grew by the amount that investors expected.<br />

What tends to send the share price moving on the day is when<br />

the announcement is above or below what was expected. Small-cap<br />

stocks are no different in this way, and this can be a clue to guide<br />

us to what may be in store for their future.<br />

What the market expects<br />

Over the past year, the fortunes of large and small companies<br />

worldwide have diverged. This was primarily driven by the largest,<br />

so-called magnificent seven companies in the US, but also reflects<br />

the risks associated with owning smaller companies, which are<br />

more sensitive to the economic cycle.<br />

One-year cumulative return for global large vs small<br />

companies (USD)<br />

Investors may favour larger companies in the late phase of an<br />

investment cycle for a few reasons. Larger companies have multiple<br />

research analysts interpreting their performance which reduces<br />

uncertainty, they have easier access to finance in times of need and<br />

they have multiple diversified products to sell which helps stabilise<br />

their cash flows. This makes larger companies an attractive offering<br />

going into an economic slowdown. But as the above performance<br />

chart shows, this may have already been acknowledged by the<br />

market. The key question is whether small-cap stocks may have<br />

enough “bad expectations” in their price; we could look to history<br />

to guide us.<br />

Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them<br />

may go down as well as up and investors may not get back the amounts originally invested.<br />

54 www.bluechipdigital.co.za

INVESTMENT | Economy<br />

BLUE<br />

CHIP<br />

The key question is whether smallcap<br />

stocks may have enough<br />

“bad expectations” in their price.<br />

What does the long-term evidence show?<br />

We have crunched the data going back to 1980 to find out. We<br />

studied how large and small-cap share prices behave during each<br />

phase of the investment cycle. The table below shows that investing<br />

in small caps when the environment feels uncomfortable has<br />

generated good results when investors take a long-term approach.<br />

mindful that investment performance can be hit by increasing the<br />

allocation to smaller companies too early, it’s prudent to ensure<br />

you have a seat at the table to avoid missing out on small-cap<br />

performance, which often arrives suddenly.<br />

We are selectively allocating to smaller companies across our<br />

investment solutions, with a keen eye on risk management. The<br />

focus is on the regions offering the best valuation opportunities,<br />

and selecting fund managers who are well-equipped to navigate<br />

any tough conditions ahead to implement this exposure. <br />

Average monthly return in US dollars (%)<br />

Phase of the economic cycle Small caps Large caps<br />

Recession and recovery 1.80% 0.85%<br />

Expansion and slowdown 1.13% 1.10%<br />

Source: Schroders as of October 2023. Past performance is not a<br />

guide to future performance and may not be repeated.<br />

While the average returns from small-cap and large-cap stocks in<br />

the expansion and slowdown phases have been similar over this<br />

period, small-cap stocks have – on average – delivered more than<br />

double the returns from large caps through both the recession<br />

and recovery phases. However, no two cycles are exactly alike, and<br />

the current cycle may provide its own clues as to what may lie in<br />

store for investors.<br />

Positioning for the next phase in the economic cycle<br />

While it’s always challenging to identify the exact turning points in<br />

any economic cycle, we are starting to see some evidence building<br />

that we are closer to a turning point than we have been in the<br />

past. Our study provides evidence that you tend to get rewarded<br />

for looking ahead to when smaller companies will do well again.<br />

We are starting to find some attractive opportunities among<br />

small caps, particularly in regions that have already experienced<br />

the pain of higher interest rates. When markets do recognise that<br />

a new phase in the investment cycle has begun, stock prices will<br />

often change sharply and suddenly. While it’s important to be<br />

Nkosi Kondi, Country Head - South Africa, Schroders<br />

Important Information<br />

For professional investors and advisers only. The material is not suitable for retail clients. We define "Professional Investors" as those who have the appropriate expertise and knowledge e.g. asset managers,<br />

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<br />

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<br />

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.<br />

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<br />

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.<br />

<strong>Issue</strong>d in January 2024 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<br />

Authority and an authorised financial services provider in South Africa FSP No: 48998<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />

INVESTMENT | Hedge funds<br />

Using hedge funds to harness<br />

the power of compounding<br />

The magic of compounding, as it relates to long-term investment returns, cannot be overstated.<br />

"The first rule of compounding: Never interrupt it unnecessarily.” – Charlie Munger<br />

“The first rule of an investment is don’t lose money. And the second rule of an investment is don’t forget the first rule. And that’s all the<br />

rules there are.” – Warren Buffett<br />

While most investors understand the importance of<br />

compounding, the impact of compounding over<br />

long periods can still be astonishing. Numerous<br />

academic studies have found that humans<br />

systematically underestimate the impact of exponential growth<br />

(ie compounding) through time. This is clearly illustrated with a<br />

well-known example. How many folds in half of a single sheet<br />

of 0.1mm thick paper would it take you to reach the moon? The<br />

answer is a mere 42 folds (I encourage interested readers to check<br />

the mathematics: 0.1mm x 2 42 ~ 420 000km vs the distance to the<br />

moon of 384 400km).<br />

While the process of compounding (in the above example,<br />

a doubling) is extremely powerful on the way up, both the<br />

investing legends quoted at the start of this article caution about<br />

when the compounding is negative: in a geometric sequence of<br />

compounding, losses have a disproportionate impact on the result.<br />

Consider if you had R1-million invested and then lost 20%, leaving<br />

you with R800 000. From that point, you would then need a gain<br />

The avoidance of losses,<br />

especially large losses, is<br />

paramount to overall investment<br />

outcomes through time.<br />

56 www.bluechipdigital.co.za

INVESTMENT | Hedge funds<br />

BLUE<br />

CHIP<br />

of 25% on your R800 000 just to get back to where<br />

you started. If you had lost 50%, you would need a<br />

gain of 100% just to get back to your starting point.<br />

Another feature of compounding is that large<br />

single-loss events can severely disrupt a longterm<br />

process of compounding. Consider an<br />

investment that returned 25% annually for 10<br />

years and then lost <strong>90</strong>% in the 11th year. That<br />

investor would be down on his initial capital,<br />

despite 10 straight years of fantastic returns<br />

and one terrible year.<br />

The nature of compounding means that<br />

despite the arithmetic average of the annual<br />

returns over the 11 years being 14.5%, this<br />

is irrelevant to the poor investor who has lost<br />

initial capital and whose compound annual return<br />

is negative. You cannot eat arithmetic returns.<br />

Investors live in a world where losses are also<br />

compounded through time and a solid record<br />

of annual average returns can be undone by a<br />

single large loss.<br />

The avoidance of losses, especially large losses, is<br />

paramount to overall investment outcomes through time.<br />

It is therefore unsurprising that the positive impact on a<br />

portfolio which simply avoided the 10 worst months on the JSE<br />

over the last 14 years is more than 50% greater than the impact<br />

of missing out on the 10 best months. It is far more important to<br />

avoid the losses than it is to take full advantage of market rallies.<br />

Consider an investor who invested R1-million into the JSE ALSI<br />

on 1 May 2009 (the launch date of the Steyn Capital QI Hedge<br />

Fund). By 30 September 2023, this ALSI portfolio would have been<br />

worth R5.3-million. However, if this investor was a savant with<br />

perfect knowledge of the future and who simply skipped the 10<br />

worst months on the JSE over the next 14 years, his portfolio as at<br />

30 September 2023 would have been worth almost double the<br />

ALSI portfolio, at just over R10.3-million. Said differently, sitting<br />

out just 6% of the months over the 14-year investment period<br />

adds the equivalent of five times the investor’s starting capital<br />

to his result.<br />

This is the power of compounding. Conversely, had the investor<br />

instead been so unfortunate as to miss out on the 10 best months,<br />

his investment would be worth just over R2-milliom, a pedestrian<br />

result to be sure, but in rand terms far less impactful than the gain<br />

of avoiding the worst months.<br />

The chart shows the portfolio outcomes for a range of scenarios<br />

our savant may have chosen.<br />

One of the significant advantages of hedge funds is their<br />

ability to harness this phenomenon by mitigating downside risk<br />

while still participating in market upside. Indeed, one of the key<br />

characteristics of the Steyn Capital hedge fund strategy is our<br />

strong focus on downside protection, which since inception has<br />

significantly reduced both the frequency and depth of portfolio<br />

drawdowns, allowing the magic of compounding to do its thing.<br />

In fact, in the 10 biggest monthly drawdowns on the JSE since the<br />

inception of our strategy, our strategy has generated a positive<br />

median return, with the median return of our strategy across all<br />

the JSE down months being positive 0.8% compared to the JSE<br />

ALSI median return of -2.4%. The cost of this downside protection<br />

is that in months of blistering market rallies, we’re unlikely to<br />

keep up. But for long-term investors, who understand the power<br />

of compounding and who rightly focus on the ultimate portfolio<br />

outcome, the long-term results speak for themselves. <br />

James Corkin, Portfolio Manager, Steyn Capital Management<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />

PRACTICE MANAGEMENT | Technology<br />

Cybersecurity: building awareness<br />

and resilience in an ever more<br />

complex technology landscape<br />

Earlier in 2023, I was speaking at a conference on Linktank’s<br />

specialist topic of finding, selecting and implementing the<br />

right technology for advisory practices. Midway through, a<br />

member of the audience asked me for advice on solutions<br />

to assist in the mitigation of cybersecurity risks. I did not have an<br />

answer for him. Until that point, we had not put a special focus<br />

on this aspect of the technology stack – we simply assumed it<br />

was something that fell firmly into the realm of the software<br />

providers and IT support, those with the more technical know-how.<br />

Subsequent conversations with advisors and vendors, however,<br />

have put the item firmly on our agenda.<br />

My explorations into the topic of cybersecurity highlighted just<br />

how vulnerable not only financial institutions are, but how every<br />

advice practice, every South African business and indeed all our<br />

clients, fall victim to these attacks regularly.<br />

I’m aware that there are a multitude of articles by specialists<br />

who have a far better grasp of the subject than I do but given the<br />

urgency of this topic, I have decided to add my voice. At the very<br />

least, to highlight the requirement for all of us to build awareness<br />

and resilience in this space and to understand a bit more about<br />

what it all means. Going forward it is critical to ensure that any<br />

South Africa is ranked among<br />

the highest cyber-attack<br />

regions in the world.<br />

decisions about selecting and implementing technology prioritise<br />

a clear cybersecurity strategy as well.<br />

The period over the Covid-19 lockdowns hastened the move<br />

to client engagements online and more of the implementation<br />

and financial planning activities also shifted into the cloud. Many<br />

of us find this new way of working more efficient and more costeffective<br />

but it also comes with a whole new set of risks which<br />

every business, especially those in financial services, now must<br />

navigate. The FSCA has drafted standards which practices need to<br />

comply with, but I wasn’t sure how many actually have yet. Turns<br />

out, not many.<br />

In an article on ITWeb 1 in July 2023, Tracy Burrows for Rubrik<br />

wrote that “African financial services organisations have around 15<br />

months to comply with the new Joint Standard: Cybersecurity and<br />

Cyber Resilience by the Financial Sector Conduct Authority (FSCA)<br />

and the South African Reserve Bank (SARB) Prudential Authority”<br />

but at the time of writing a poll of participants revealed that only 2%<br />

are 100% prepared to implement the Joint Standard and an audit.<br />

A total of 22% said they had completed a gap analysis and were<br />

swiftly moving to prepare for it. Another 28% were investigating<br />

the policy intending to prepare and a further 28% had not yet<br />

investigated the policy. A staggering 18% responded, “What are<br />

the Joint Standards?” Moreover, when it comes to complying with<br />

the terms of any cybersecurity insurance, financial advisors have<br />

expressed how complex it is to understand the requirements, let<br />

alone comply with them.<br />

There is a critical need for better understanding and more<br />

awareness building for advisors, while vendors and support<br />

58 www.bluechipdigital.co.za

PRACTICE MANAGEMENT | Technology<br />

BLUE<br />

CHIP<br />

services actively work to ensure that we build technology solutions<br />

which keep our businesses, employees and clients safe. Saying<br />

this, however, making IT support teams entirely responsible for<br />

managing cybersecurity risk or relying purely on software providers<br />

to ensure the safety of your data is foolhardy. Cybercriminals’<br />

tactics evolve all the time, and our IT teams and software vendors<br />

can do all they can to keep up, but it is ultimately down to each<br />

user of technology to build their knowledge around the types of<br />

threats out there and stay vigilant.<br />

Why the urgency and what are the types of risk?<br />

South Africa is ranked among the highest cyberattack regions in the<br />

world. 2 According to Interpol’s African Cyberthreat Assessment Report<br />

2022, a total of 230-million cyber threats were detected in South Africa,<br />

out of which 219-million, or 95.21%, were email-based attacks. What’s<br />

worse is that the nation is already suffering from an alarming 100%<br />

increase in mobile banking application fraud and is experiencing on<br />

average 577 malware attacks every hour.<br />

And what are the loopholes in South Africa’s cybersecurity system<br />

that bad actors are taking advantage of? Basically:<br />

1. Poor investment in cyber-security systems<br />

2. Lack of awareness across users of technology<br />

3. Poor law enforcement to act on cyberattack cases<br />

Where do we start to build awareness?<br />

We, the users, are our own first line of defence. Make sure you and your<br />

team are aware of the most prevalent threats and how they work. Most<br />

of the threats come via email with a variety of forms and outcomes:<br />

• Ransomware – business email compromise and ransomware<br />

• Phishing attacks – these are experienced across email, WhatsApp,<br />

SMS platforms and even QR codes are now used to get access to<br />

your information network<br />

• Social engineering/impersonation<br />

• Implementing robust security measures, next-generation antivirus<br />

solutions, including:<br />

· firewalls<br />

· antivirus software<br />

· encryption<br />

· secure data storage<br />

· regular data backups<br />

· multi-factor authentication, strong access controls and incident<br />

response plans.<br />

Building resilience means that a business has the processes<br />

and backups in place to “bounce back” if they have fallen into a<br />

cyberattack trap. Sounds technical right? So, make sure that the<br />

team that is supporting you from an IT perspective is talking to you<br />

about these issues, ensuring necessary checks are in place and that<br />

your team and clients understand why the processes are required.<br />

In summary, don’t let this be another case of “kicking the can<br />

down the road” because the consequences could put you out of<br />

business. Ask questions and find the right team to educate, advise<br />

and support you. <br />

Sources<br />

1. Financial services must move to comply with new standards for<br />

cyber resilience, by Tracy Burrows for Rubrik. www.itweb.co.za<br />

2. What makes SA a target for cybercrime? What actions can be taken? by<br />

Eleanor Barlow, content manager at SecurityHQ. www.itweb.co.za<br />

But there are other threats like:<br />

• Insider threats – posed by discontented employees or<br />

ex-employees/colleagues<br />

• Device mismanagement<br />

• Weak passwords<br />

• Third-party risk – your technology infrastructure and email<br />

domain may be secure, but we cannot assume the same for third<br />

parties, especially clients using public email addresses<br />

The good news is that there is a growing number of service<br />

solutions that offer comprehensive course material advisors can<br />

use to build awareness. Most of them will “test” staff members<br />

on their cybersecurity prowess. Companies like Mimecast and<br />

Synaptic SA are just two which we have recently engaged with,<br />

but we intend to find more.<br />

Where do we start to build resilience?<br />

As we gain a better understanding of how to mitigate risks,<br />

financial planning practices will start to hear more and more about:<br />

Robyn Clay, Director, Linktank<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />

PRACTICE MANAGEMENT | Technology<br />

Maximising efficiency<br />

in board management<br />

A guide for employee benefit consultants using cloud computing and AI.<br />

In an era where efficiency is paramount, employee benefits<br />

consultants must embrace the technological advancements in<br />

cloud computing and Artificial Intelligence (AI) to streamline<br />

executive board management. Zeldeen Müller, CEO of inSite<br />

Connect and creator of AgendaWorx, highlights the transformative<br />

power of these tools in enhancing board operations.<br />

First off, why cloud computing and AI?<br />

If you look at a historical perspective on data storage, in 1956, a<br />

five-megabyte hard drive weighed one ton. In 1980, a one-gigabyte<br />

hard drive weighed 250kg and cost US$40 000. Contrast this with<br />

today, where one gigabyte of extra data costs merely R4.50 when<br />

hosted on large data centres. This dramatic evolution underscores<br />

the incredible advancements in technology that have reshaped how<br />

we manage and store data and interact with information.<br />

Traditional board data management involved complex,<br />

costly internal servers provided by employee benefit (EB) firms,<br />

with limited, if any, access to board members and reduced<br />

flexibility. With the advent of the Internet and accelerated by the<br />

Covid-19 pandemic, a shift towards digital tools for remote board<br />

management occurred.<br />

Consultants and boards adopted various digital platforms for<br />

tasks such as document sharing, email communication, meeting<br />

arrangements and tools for signing, voting and evaluations.<br />

However, the proliferation of these different tools often resulted<br />

in disjointed experiences for board members and heightened<br />

security risks due to the fragmented nature of tool usage.<br />

How can employee benefit consultants and boards use<br />

cloud computing to reduce the number of tools needed for<br />

everyday board operations?<br />

Cloud computing addresses this by offering integrated<br />

application solutions, reducing the need to juggle multiple<br />

platforms and enhancing data security. It takes board<br />

management to the next level by consolidating various tasks<br />

into a single, efficient platform.<br />

At AgendaWorx, we ensure that a single tool now enables rapid<br />

agenda preparation, minute creation, signing, board resolution<br />

approval, follow-ups, evaluations and comprehensive library<br />

creation with intuitive folders and action reminder automation,<br />

eliminating the need to navigate multiple tools.<br />

How is AI utilised to leverage more efficiencies?<br />

AI enables intuitive interactions, such as conversing with it<br />

to format and integrate inputs into agendas or minutes. This<br />

removes the need for typing, copywriting, copy editing, collating,<br />

formatting and many other time-consuming tasks for employee<br />

benefits consultants. Additionally, AI’s analytical capabilities are<br />

becoming invaluable in tasks like comparing investment returns<br />

and analysing service provider quotes. The integration of cloud<br />

computing and AI is revolutionising board management.<br />

Zeldeen Müller, CEO, AgendaWorx<br />

That sounds great. Why should employee benefit consulting<br />

houses consider these tools?<br />

For employee benefits consultants, adopting these technologies<br />

not only saves valuable time but also elevates service quality. In<br />

a competitive landscape, leveraging the efficiencies of AI and<br />

cloud computing is essential for staying ahead and providing<br />

top-tier consultancy services. We have seen a marked increase in<br />

the uptake of our platform since January this year, as consultants<br />

are beginning to understand the benefits of leveraging these<br />

technologies to stay relevant. <br />

60 www.bluechipdigital.co.za


YOU - will talk, not type!<br />

AI<br />

- will:<br />

1. Transcribe (99% accuracy with SA accents) & convert<br />

basic transcription into professional, AI edited copy;<br />

2. One button will: fix formatting (fonts, justification,<br />

spacing, indentation and more), one button will<br />

collate, number pages, create numbered index &<br />

add hyperlinked bookmarks. Yes, two buttons will<br />

do ALL this.<br />

Online Board Packs &<br />

Secure Board Portal<br />

Decrease the time to create your agendas and<br />

minutes by 80%. Can you afford not to try it?<br />


BLUE<br />

CHIP<br />

PRACTICE MANAGEMENT | Technology<br />

Finding the balance between<br />

digitalisation and personal touch<br />

For over a decade, I’ve been working with financial planners<br />

who have found themselves at a vertiginous crossroads<br />

when it comes to digitalising their client engagement<br />

and communications strategies. Discerning advisors are<br />

enthusiastic about embracing the age of digital transformation;<br />

however, they haven’t been willing to sacrifice their unique voice<br />

and the personal touch that sets them apart.<br />

The digital domain presents both opportunities and challenges.<br />

Advisors understand that their clients are increasingly online,<br />

seeking information, advice and meaningful connections. Yet, they<br />

also fear that going digital could mean losing the essence of what<br />

makes them valuable to their clients – their individuality, expertise<br />

and the authentic relationships they build.<br />

While certain traditional client interaction strategies will always<br />

remain essential, this virtual platform can neither be ignored nor<br />

avoided. We live in a newly emerged communication culture<br />

driven by social media and online conversations.<br />

For years, my team and I have believed that this new strategy is<br />

paved with the power of blogs.<br />

Rather than seeing them as mere content pieces, I consider<br />

blogs as conversation sparkers. They are the connective tissue<br />

that bridges the gap between digitalisation and personalisation,<br />

allowing financial planners to maintain their unique voices while<br />

engaging clients in meaningful discussions.<br />

In a recent <strong>Blue</strong> <strong>Chip</strong> article, I spoke about the three Cs of<br />

conversation – content, connection and community. Each<br />

component is interwoven with the others, creating a holistic<br />

approach to client engagement, and blogs fit into the first C, content.<br />

Your online brand is a<br />

powerful tool, working for<br />

you around the clock.<br />

62 www.bluechipdigital.co.za

PRACTICE MANAGEMENT | Technology<br />

BLUE<br />

CHIP<br />

The power of blogs as conversation sparkers<br />

Blogs, when used strategically, embody the essence of the three<br />

Cs. They are not just information dissemination tools; they are the<br />

instruments that transform your online presence into a dynamic<br />

platform for client engagement.<br />

From education to engagement. While education has<br />

always been a vital component of financial planning, blogs offer<br />

the opportunity to take it further. They assist in keeping your<br />

online conversation going, encouraging clients to participate in<br />

discussions actively. In this way, blogs elevate client engagement<br />

from passive learning to active interaction.<br />

Effective email campaigns. Regular email campaigns remain<br />

one of the best ways to stay in touch with your clients, and blogs<br />

make this task significantly easier to sustain. With blogs in place, it’s<br />

a streamlined activity to send out monthly newsletters with blog<br />

teasers, providing clients and prospects with bite-sized, valuable<br />

content that piques their interest without overwhelming them<br />

and sparks conversations. Email campaigns (when sent through<br />

apps like MailChimp) also offer valuable insights, allowing you to<br />

track opens and clicks, helping you understand how your clients<br />

prefer to engage with your content, and who is likely to want to<br />

chat with you.<br />

Incorporating blogs into client meetings. Online<br />

communication isn’t just for online engagement. It can enhance<br />

your in-person meetings, too. Imagine having a folder on your<br />

bookmarks toolbar labelled “blogs for clients”. In it, you save blogs<br />

that you believe would add value to your upcoming meetings (with<br />

clients and prospects). You could easily and quickly access these<br />

blogs as conversation sparkers, facilitating deeper discussions<br />

that are not centred around products or market performance.<br />

Intertwining your online and offline interactions creates<br />

opportunities for richer, more meaningful client experiences.<br />

Leveraging LinkedIn. LinkedIn is a professional social network<br />

offering a unique platform for expanding your reach (linking<br />

content and community). You can build brand advocacy because<br />

sharing your blogs on LinkedIn stimulates the potential for your<br />

clients to promote you within their networks. It’s an authentic way<br />

of turning your clients into advocates, fostering organic growth<br />

and influence as well as building your online brand.<br />

Online branding: the key to the future<br />

Your online brand is a powerful tool, working for you around<br />

the clock. It should empower you, not ensnare you in the digital<br />

labyrinth. Most importantly, it should lead to direct interactions<br />

with your clients – calls to your phone, not just clicks on your posts.<br />

Here are three key objectives to hold in mind when building<br />

your online brand:<br />

1. Reinforce, not replace. Ensure that your online brand reflects<br />

and reinforces your identity. It should be a digital extension of<br />

who you are, not a replacement.<br />

2. Empower, not ensnare. Your online brand should empower<br />

you to engage with your clients more effectively. It should be<br />

a strategy that enables you to nurture relationships and foster<br />

valuable conversations.<br />

3. Calls, not clicks. Your online brand should lead to direct<br />

interactions with your clients. It should serve as a gateway for<br />

them to reach out, inquire, and engage with you.<br />

Blogs are not just content for search engine optimisation;<br />

they’re conduits for conversation, and driving connection with<br />

your community. They have the power to elevate your client<br />

engagement strategy to new heights. Do you think it’s time to<br />

shift your focus from educating to engaging, sparking dialogues<br />

that build trust and foster lasting relationships?<br />

If you want to put people first and bring out the human element<br />

in your online communication, blogs can be a powerful way to<br />

achieve this through a scalable, sustainable strategy. <br />

Tim Slatter, Creator of Contatto and Director,<br />

Slatter Communications<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />

PRACTICE MANAGEMENT | Technology<br />

Get ready for the<br />

greatest wave<br />

of technological<br />

innovation<br />

We find ourselves in a time where technology is<br />

changing quickly, with artificial intelligence (AI)<br />

at the front of the pack and about to change the<br />

financial planning and advice business. Forever.<br />

If you did not feel a little sick when reading the words “artificial<br />

intelligence”, you haven’t spent enough time on it yet. Also,<br />

notably, now that many (if not most) use Microsoft 365, the time<br />

is right for game-changing tools like Microsoft’s Copilot. Copilot<br />

and similar tools can help with both efficiency and new ideas in<br />

ways that have never been possible before.<br />

The revolution in AI<br />

The latest information from the Microsoft Envision conference in<br />

London and Microsoft Ignite in Seattle shows that we are living<br />

in a very important time in the history of technology: Microsoft is<br />

putting a lot of money into AI, and they see the launch of Copilot<br />

as being like the release of Windows and the personal computer.<br />

They candidly shared that the last major innovation was the<br />

iPhone in 2007 and before that, the Internet in 1993. And they<br />

believe this is much bigger. This should give us a preview of how<br />

Copilot could change the way work is done similarly to how these<br />

technologies did before.<br />

Copilot isn’t just another piece of technology; it changes the<br />

way we do work in a big way. It’s supposed to turn boring tasks into<br />

streamlined processes, give people more personalised experiences<br />

and let companies build their solutions. Instead of taking a slow<br />

walk, its release is like riding a bike – faster, more efficient and<br />

with less effort.<br />

The two types of AI<br />

According to the Gartner Opportunity Radar, there are two types<br />

of AI, namely Everyday AI and Game-changing AI.<br />

AI offers many benefits and<br />

opportunities for financial<br />

planners and advisors.<br />

Everyday AI is very much about AI that everyone will be using,<br />

and it is the type of AI that most of us are currently exploring and<br />

experimenting with. Without Everyday AI, you will not be able to<br />

compete with others. Everyday AI will be vital in your back office<br />

and some firms will be comfortable using this in client-facing<br />

scenarios as well.<br />

Game-changing AI is about creating new products and services<br />

never been seen or delivered before. It is also about investing in<br />

creating new core capabilities never possible before. This type<br />

of AI is costly at the moment and therefore only big corporate<br />

businesses and the like are currently focusing on this.<br />

What AI means for financial planners and advisors<br />

AI offers a lot of benefits and opportunities for financial planners<br />

and advisors. Imagine being able to automate simple jobs or keep<br />

an easy-to-read log of all your interactions with clients. AI tools<br />

like Copilot can look at data, draw conclusions and even make<br />

beautiful visualisations that make complicated information easy<br />

to understand.<br />

AI can revolutionise taking notes, writing documents and<br />

doing prep work in the real world, making these jobs faster and<br />

more accurate. By automating these tasks, financial professionals<br />

can focus on making strategic decisions and having one-on-one<br />

conversations with clients, which will help the business grow and<br />

improve the level of service.<br />

64 www.bluechipdigital.co.za

PRACTICE MANAGEMENT | Technology<br />

BLUE<br />

CHIP<br />

Virtual agents are a big step up from the traditional chatbots we<br />

came to dislike over the years. Why? These virtual agents can have<br />

human-like conversations and draw on information from your firm<br />

and your practice that relates to the client it is engaging with. In<br />

other words, it will have a normal conversation with context. This<br />

will be helpful to provide a 24/7/365 service to clients to answer<br />

questions and provide them with relevant information on a realtime<br />

basis.<br />

Getting ready for the AI wave<br />

To deal with this AI wave, you need to be strategic. People who<br />

work as financial planners and advisors or who run a financial<br />

planning or advisory firm should learn more about AI tools and<br />

how they work.<br />

It’s also important to organise and optimise data so that AI<br />

can use it and use AI tools to get hands-on experience. Working<br />

together with tech experts and experienced AI professionals<br />

can help you learn a lot and make the switch to an AI-integrated<br />

workflow go smoothly.<br />

Other ways to learn include LinkedIn Learning, Microsoft Learn,<br />

YouTube and Udemy.<br />

Three pillars for AI-readiness<br />

The three pillars are principles, data and security. This is evident<br />

from the focus at several events I attended over the last number<br />

of months.<br />

The first step is to be clear about your own ground rules when<br />

it comes to the implementation, adoption and use of AI. Your do’s<br />

and your don’ts. Your clients’ do’s and don’ts. Regulatory do’s and<br />

don’ts. This is your decision framework.<br />

The second step is getting your data ready. And not all your<br />

data needs to be ready. Identify the 20% of data that is important<br />

for 80% of the services and tasks you perform and focus on that.<br />

An important aspect is to be able to identify data that is used<br />

for specific tasks using tags (or labels). As part of the data step,<br />

documented processes are a must.<br />

The third and final step is ensuring that you implement the<br />

relevant security measures and protocols. Who will have access to<br />

what data? Who can share data? What data can be shared? How will<br />

you ensure secure communications with clients, products and other<br />

service providers? How will devices be secured and managed? And<br />

what training will you facilitate for staff and clients alike?<br />

Must-know highlights from Microsoft Envision and Ignite<br />

One of the best features, M365 Chat, is going to become an AI<br />

assistant that is essential to both work and personal life. This app is<br />

meant to be a hub for work and life, and it encourages interaction<br />

between users that is like talking to a real assistant.<br />

Copilot’s integration features are a game-changer because they<br />

make jobs like making client presentations possible in a matter of<br />

seconds. Also, Copilot and Azure make it easier to build custom<br />

technology. For example, we built a client fact-finding landing<br />

page quickly using the Microsoft Power Platform and Copilot.<br />

Because making technology is so easy, financial advisory firms<br />

can now produce their own solutions, which is a truly groundbreaking<br />

development.<br />

Copilot’s data security is very important, especially for financial<br />

planning companies that deal with private client data. Professionals<br />

who are worried about data breaches can take comfort in the<br />

fact that Microsoft has put a lot of effort into making the Copilot<br />

ecosystem’s security strong.<br />

Lastly, Microsoft wants users to learn how to prompt AI tools<br />

well so that they can move away from standard search engine<br />

queries and towards more conversational, instruction-based<br />

interactions with AI.<br />

Risks and taking charge<br />

There are risks to consider, even though the benefits are plenty.<br />

Privacy and protection of data are very important, especially when<br />

dealing with personal and related financial data. To reduce these<br />

risks and stay ahead in the business, you need to keep learning and<br />

adapting to how AI is changing and what to look out for.<br />

In conclusion<br />

AI isn’t just a fad; it’s the way things will be in the future for<br />

financial planners and advisors. You can be at the forefront of<br />

this technological revolution by understanding AI’s potential,<br />

preparing its integration and managing the risks that come with<br />

it. You can use AI’s power to improve efficiency, customer service<br />

and business growth.<br />

Stay curious!<br />

Francois du Toit, CFP®, Founder, PROpulsion<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />

CLIENT ENGAGEMENT | Coaching<br />

The financial planner<br />

as thinking partner<br />

Thinking with clients or for clients?<br />

I<br />

believe a key role a financial planner plays for a client is that of a<br />

Thinking Partner. The dilemma this raises is whether this means<br />

the financial planner must think for the client or with the client.<br />

The quality of advice is as important as how it is delivered<br />

Emotional and economic well-being are both key to financial<br />

health. The link between money and life is also clear. The two<br />

are inextricable. And that’s why even though clients may go to<br />

a financial planner for advice, getting advice too quickly may be<br />

more damaging than helpful. It is not only the quality of the advice<br />

that counts but also how that advice is delivered. In other words,<br />

what a client talks about with a financial planner before receiving<br />

advice is key.<br />

Financial planners are wired to advise clients. It’s in their DNA.<br />

And it’s what clients expect from them. Clients often want their<br />

financial planner to tell them what to do. The problem with this<br />

approach, as much as clients want it, is that it makes the financial<br />

planner accountable for their client’s life and money. This may seem<br />

justifiable because, after all, the client is paying for this advice. So<br />

if things don’t work out, the client has someone to blame. And of<br />

course, they can then switch to a new advisor. In a sense, they have<br />

“rented” the financial planner’s advice or solution rather than taken<br />

ownership of it. Much easier for them. And, in some ways easier for<br />

the financial planner, although they may lose an unhappy client<br />

now and again.<br />

Economic and emotional well-being are key to financial health<br />

Yet, client ownership of the outcome is key to clients achieving<br />

good financial outcomes. Research by Sarah Newcomb of<br />

It is not only the quality of the<br />

advice that counts but also<br />

how that advice is delivered.<br />

Morningstar shows that for clients to achieve genuine financial<br />

health, they need both economic and emotional well-being. 1<br />

Wealthy people who spend little are at risk of being as financially<br />

unhealthy as happy people who spend generously.<br />

Newcomb suggests that economic well-being depends not so<br />

much on how much money clients have, but rather on the extent<br />

to which clients think into the future. Newcomb’s research shows<br />

that people with a full financial life plan save up to 20 times more<br />

than people who are only able to think a year or less into the future.<br />

Accordingly, it is a client’s time horizon more than their income<br />

that determines economic well-being, and Newcomb’s research<br />

shows that this influences not only savings habits but cash and<br />

debt management as well.<br />

Emotional well-being has a critical influence on how we<br />

manage our money. According to the American Psychological<br />

Association, money is consistently the number one source of<br />

stress for US households. 2 Newcomb suggests that “by identifying<br />

specific patterns of thought that may sabotage a client’s overall<br />

financial health, an advisor can help guide clients into making<br />

better financial decisions and increase their satisfaction and peace<br />

of mind”. 3<br />

66 www.bluechipdigital.co.za

CLIENT ENGAGEMENT | Coaching<br />

BLUE<br />

CHIP<br />

Thinking with a client means getting a client to think<br />

for themselves<br />

While clients see financial planners for advice not coaching,<br />

adopting a coaching approach with clients can help clients think<br />

for themselves and feel empowered before the financial planner<br />

gives advice. A coaching approach involves getting the client to<br />

find the answers to questions they may have. Often a question<br />

may be technical, in which case the financial planner may be best<br />

positioned to answer the question. But when the question is about<br />

their own life, the client undoubtedly will take more ownership of<br />

the answer if they come up with it themselves.<br />

Thinking with a client means getting a client to think for<br />

themselves. It’s tempting to want to do the thinking for the<br />

client. To believe that is a way to show real value and expertise.<br />

But getting a client to think for themselves is the real work of a<br />

Thinking Partner. It is a way for clients to feel empowered, take<br />

ownership of their financial health, and ensure that when the seed<br />

of expert advice is given, it lands on fertile soil. <br />

Client ownership and empowerment determine<br />

financial satisfaction<br />

Newcomb’s research shows that irrespective of income, people<br />

who feel empowered in their financial lives feel more emotionally<br />

satisfied with their financial lives. People who agreed with the<br />

statement “I create my financial destiny” had more positive<br />

experiences regarding their financial situation than those who<br />

said they had “very little power” over their financial life.<br />

When a client seeks financial advice, for that advice to land it<br />

is key that the advice makes sense to the client from their unique<br />

perspective. It’s not enough that it makes sense from the advisor’s<br />

perspective, which would be fine if the job of a Thinking Partner<br />

was to think for a client.<br />

Newcomb’s research reinforces the importance of clients<br />

taking ownership of their financial circumstances, even when<br />

seeking financial advice from a professional. It also highlights<br />

the role of financial planners in helping clients to think as far<br />

as possible into the future with as much detail as possible. This<br />

suggests that key to the role of a Thinking Partner is to think with<br />

the client, in other words, get the client to think, rather than think<br />

for the client. That way there is a greater chance that the client<br />

will own the outcome of whatever advice the financial planner<br />

eventually gives.<br />

After all, we each have a unique perspective on the world that is<br />

influenced by a myriad of factors, including our upbringing, family,<br />

education, culture, values, habits and language, to name only a<br />

few. This unique combination underpins each of our perspectives<br />

on the world and gives truth to writer Anais Nin’s observation that<br />

“we don’t see things as they are, we see them as we are”.<br />

References<br />

1 <br />

Sarah Newcomb, When More is Less: Rethinking Financial Health,<br />

Morningstar Behavioural Science Research, 2016.<br />

2 <br />

American Psychological Association, Stress in America Survey,<br />

October 2022.<br />

3<br />

Sarah Newcomb, When More is Less: Rethinking Financial Health,<br />

Morningstar Behavioural Science Research, 2016. p.7<br />

Rob Macdonald, Head of Strategic Advisory Services, Fundhouse<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />

CLIENT ENGAGEMENT | Behavioural finance<br />

Unleashing client success: the<br />

power of value-based conversations<br />

When it comes to financial decisions, clients are not<br />

solely driven by logic – emotions and deeply held<br />

values play a significant role in their judgement and<br />

reasoning. Planners who recognise the importance<br />

of understanding their clients’ core values can transform their<br />

financial planning approach and propel clients towards lasting<br />

success. Value-based conversations establish a meaningful<br />

connection between planners and their clients, and clients are<br />

more likely to support the financial strategy and adjust their<br />

money habits to attain their financial goals when the plan aligns<br />

with what they value most.<br />

Understanding the emotional drivers: aligning money choices<br />

with core values<br />

It is no secret that emotions significantly influence money choices,<br />

often leading to poor decision-making driven by fear, greed or<br />

guilt. However, when clients are in touch with their ideals and<br />

beliefs, their financial actions and behaviour align with their values,<br />

empowering them to make decisions that truly serve their best<br />

interests. As financial planners, it is crucial to unravel the emotional<br />

drivers behind financial choices and gain a deeper understanding<br />

of our clients’ needs and aspirations.<br />

Renowned researcher and author Dr Brené Brown has<br />

demonstrated the power of values in driving productive<br />

decisionmaking. I participated in a recent webinar for Certified Dare<br />

to Lead Facilitators, where she shared how astronauts at NASA<br />

embraced daring leadership by explicitly naming and clarifying<br />

their values, then translating them into specific behaviours with<br />

clear expectations. This approach drives thoughtful, decisive and<br />

aligned decision-making.<br />

Financial planners can adopt a similar approach by helping<br />

clients uncover their core values and translating them into<br />

actionable financial strategies that align with their beliefs.<br />

Where to start<br />

Financial planners should be clear about their own values because<br />

they shape intentions, decisions and advice. Being consciously<br />

aware of our values allows us to be better equipped to offer<br />

guidance that resonates with our clients’ needs and aspirations –<br />

even if it may differ from our own.<br />

Consider the case of a client, Ben, who was unexpectedly<br />

retrenched at 54. With a younger wife and a young son with years<br />

of expenses ahead, Ben needed to produce at least another two<br />

decades of income. However, he was unsure about what his next<br />

chapter should look like. By understanding Ben’s values through<br />

our conversations, I discovered that he wanted to take time out to<br />

align his future work with his values, assess what he loved about<br />

his career and leave behind aspects of work that he did not enjoy.<br />

During our meeting, I could see that he had enough to fund a<br />

two-year gap from work. I showed him that after this pause, he<br />

would need to move into the next phase of his working life and<br />

generate income again until age 70. Rather than solely focusing<br />

on earning immediately, he agreed to work more years – doing<br />

work his values aligned with.<br />

It is essential to recognise that unconscious biases or implicit<br />

preferences can influence our advice. This could result in planners<br />

68 www.bluechipdigital.co.za

CLIENT ENGAGEMENT | Behavioural finance<br />

BLUE<br />

CHIP<br />

recommending strategies aligned with their own beliefs and<br />

views, potentially neglecting options that may be more suitable<br />

for the client. Regular self-awareness and reflection on our values,<br />

assumptions and belief systems allow us to deliver unbiased,<br />

client-centric recommendations.<br />

Why knowing your clients’ values matters<br />

Understanding your clients’ core values enables you to align<br />

your advice and recommendations with their needs, goals and<br />

aspirations. Core values shape priorities and long-term goals. By<br />

uncovering these values, financial planners can customise their<br />

advice to reflect what truly matters to their clients. This deeper<br />

level of understanding fosters trust and enables you to frame<br />

choices that align with your clients’ values, leading to decisions<br />

consistent with their beliefs.<br />


Let’s explore two case studies that highlight the power of<br />

valuebased conversations:<br />

John to embrace retirement confidently and retain his sense of<br />

purpose as a provider.<br />

Unlocking success through value-based conversations<br />

Integrating clients’ core values into the financial decision-making<br />

process enables financial planners to provide personalised and<br />

meaningful advice. By aligning financial goals with core values,<br />

clients experience a greater sense of purpose and satisfaction<br />

in their decision-making, paving the way for long-term financial<br />

well-being. I have found the values exploration exercise a helpful<br />

tool to help clients uncover their core values. Begin by presenting<br />

them with a list of values and ask them to identify their top 10.<br />

Through a process of elimination, guide them to identify their top<br />

two values. This exercise can be repeated over time as values may<br />

evolve during life’s transitions.<br />

By embracing these conversations, financial planners empower<br />

clients to make decisions that align with their values, goals and<br />

aspirations. This approach fosters a deeper connection, builds trust<br />

and leads to meaningful financial success. <br />

Family first<br />

Sarah, a successful corporate professional and single mother of<br />

two young children, wanted to invest in a holiday home to spend<br />

more quality time with her children. Through conversations<br />

centred on core values, we discovered that her children were<br />

at the forefront of her priorities and that this investment would<br />

mean longer working hours to afford it. She would hardly have<br />

the time for holidays and her children would have left home when<br />

her loan was paid. By aligning her financial plan with these values,<br />

we crafted a strategy allowing Sarah to reduce her working hours,<br />

spend more time with her children and have regular holidays and<br />

rent holiday homes instead. This alignment gave Sarah a sense<br />

of purpose, satisfaction and a life that resonated with her values.<br />

Emotions significantly influence<br />

money choices, often leading<br />

to poor decision-making<br />

driven by fear, greed or guilt.<br />

Redefining retirement for a provider<br />

John, a dedicated father and provider, faced a significant challenge<br />

as he approached retirement. He had always associated his<br />

selfworth and identity with providing for his family. The transition<br />

from saving to spending during retirement created a mental<br />

struggle. By exploring his values and beliefs, we helped John<br />

understand that his investments were now the means of continued<br />

provision for his loved ones. Together, we redefined his role and<br />

created a retirement plan aligned with his principles to support his<br />

family and provide financial security. This shift in mindset allowed<br />

Kim Potgieter CFP®, Director, Chartered Wealth Solutions,<br />

ICF Professional Certified Coach, New Money Story® Mentor<br />

Coach, Certified Dare to Lead Facilitator<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />

FINANCIAL PLANNING | Estate planning<br />

Closing the circle: the importance of<br />

closing the wealth management loop<br />

Most people want to enjoy life while they are working<br />

and building wealth, have enough savings to<br />

maintain their lifestyle when retired plus ensure that<br />

any dependants are financially taken care of when<br />

they die. Achieving this takes careful planning and a disciplined<br />

strategy. Engaging a trusted wealth manager to look at your<br />

entire financial picture and implement strategies to achieve your<br />

short- and long-term financial goals may reduce your stress about<br />

money, support your current financial needs and help you build a<br />

nest egg for your goals.<br />

“Wealth managers owe their clients the best possible structuring<br />

and guidance for their lifetimes, but also the best outcome if their<br />

lives are cut short,” says Sarah Love, a fiduciary practitioner with<br />

Private Client Trust, the fiduciary pillar of Private Client Holdings.<br />

Love works with wealth managers to make sure that the financial<br />

planning loop is closed. She offers advice and guidance on estate<br />

planning and makes sure that a legal and watertight will is in place.<br />

Love starts her fiduciary role by establishing if a client has any<br />

legal obligations, such as a spouse, minor children or other financial<br />

dependants. “Once we have this information, we need to establish if<br />

there is enough wealth for them to meet both their legal obligations<br />

and maintain their chosen lifestyle. If not, we need to consider<br />

additional solutions to fill the gap,” says Love. A critical aspect of<br />

closing the wealth management loop is for clients to have a valid will.<br />

“Given the delicacy of family relationships, it’s critical to work<br />

with a fiduciary practitioner when drafting a will as a minor<br />

Given the delicacy of family<br />

relationships, it’s critical to work<br />

with a fiduciary practitioner<br />

when drafting a will.<br />

oversight may have severe consequences for beneficiaries,” says<br />

Love. An incorrectly executed will can not only tear families apart<br />

emotionally, but can result in intestate succession or, if there<br />

are grounds, a High Court application to condone the incorrect<br />

execution and declaration that the will is accepted.<br />

With people increasingly owning property and having capital<br />

offshore, all worldwide assets must be included in a will. “Offshore<br />

inheritance taxes and estate duty may decimate local estates with<br />

devastating consequences for the South African heirs if a fiduciary<br />

practitioner was not consulted when the will was drawn up,” says Love.<br />

Once the will meets the client’s wishes and is executed<br />

correctly, Love advises circling back to review all their beneficiary<br />

nominations for pension funds, annuities, endowments and life<br />

policies to ensure that the right people have been nominated<br />

to receive the right benefits. She also advises her clients, where<br />

appropriate, to consult with their adult beneficiaries and make<br />

them an integral part of the succession planning process to make<br />

sure everyone is aware of the<br />

implications and can arrange<br />

their affairs accordingly.<br />

“Our structuring will have<br />

been in vain if a will doesn’t meet<br />

the needs of a client’s heirs and<br />

factor in their whole financial<br />

plan. Unwinding structuring<br />

such as a trust and or company<br />

may also trigger unnecessary<br />

taxes and administration costs,”<br />

concludes Love. <br />

For more information email<br />

sarah@privateclient.co.za or<br />

visit www.privateclient.co.za.<br />

Sarah Love, CFP®, Fiduciary<br />

Practitioner, Private Client Trust<br />

PRIVATE CLIENT HOLDINGS IS AN AUTHORISED FINANCIAL SERVICES PROVIDER. The licenses we hold with the Financial Sector Conduct Authority (FSCA) are Private Client Holdings – FSP 613, Private<br />

Client Portfolios – FSP 399 78 and Private Client Wealth Management – FSP 399 79. Private Client Trust has taken care to ensure that all the information provided herein is true and accurate. Private Client<br />

Trust will therefore not be held responsible for any inaccuracies in the information herein. The above press release does not constitute advice and the reader should contact the author for any related<br />

concerns. Private Client Trust shall not be responsible and disclaims all loss, liability or expense of any nature whatsoever which may be attributable (directly, indirectly or consequentially) to the use of<br />

the information provided.<br />

70 www.bluechipdigital.co.za


The licenses we hold with the Financial Sector Conduct Authority (FSCA) are: Private Client Holdings – FSP 613,<br />

Private Client Portfolios – FSP 399 78 and Private Client Wealth Management – FSP 399 79.<br />


BLUE<br />

CHIP<br />

FINANCIAL PLANNING | Legislation<br />



The family law fraternity (divorce lawyers in particular)<br />

are all a-buzz with the Constitutional Court’s recent<br />

judgement in the case of EB v ER and Others; KG v<br />

Minister of Home Affairs and Others.<br />

For any aspiring law geeks among you, the full judgement<br />

penned by Justice Rogers is well worth a read, but as it stretches<br />

to a lengthy 72 pages, I thought you may appreciate something<br />

a little punchier.<br />

The liberal view is that the<br />

judgement is a triumph for our<br />

constitutional democracy.<br />

What’s it all about?<br />

The nub of the issue is essentially this:<br />

In the past, wealthy people getting married would often<br />

try to safeguard their assets against divorce by insisting on an<br />

antenuptial contract (or prenup) stipulating that the marriage<br />

would be out of community of property and would exclude<br />

the accrual system. For the sake of simplicity let’s call this a<br />

“No Share ANC”.<br />

Effectively a No Share ANC stipulates “what’s mine is mine,<br />

what’s yours is yours (‘til death or divorce do us part) and the<br />

fact that we’re getting married for a bit in between isn’t going<br />

to change that”.<br />

Typically, with a No Share ANC, the wealthier spouse (let’s<br />

call them No Share Sherlock) slept comfortably at night secure<br />

in the knowledge that when the marriage ends (and let’s face<br />

it, all marriages come to an end at some point, even if only<br />

because eventually somebody dies) they won’t have to hand<br />

over any assets to their former spouse (or their spouse’s heirs,<br />

for that matter).<br />

Since the EB v ER and KG judgement things have changed<br />

– and No Share Sherlock should now be aware that there is a<br />

possibility that some assets will be “redistributed”. Effectively,<br />

the recent Constitutional Court judgement has resulted in a<br />

change in the law – such that a court is now empowered to<br />

order No Share Sherlock to transfer a portion of his/her assets<br />

to his/her former spouse, even though they both signed a No<br />

Share ANC.<br />

The rands and cents<br />

How much might No Share Sherlock have to pay? you ask.<br />

The amount that the court deems “just and equitable” in the<br />

circumstances, is the answer. While this may seem a bit vague<br />

and unsatisfactory, one should take (some) comfort from the fact<br />

that, at least in principle, it shouldn’t be a totally arbitrary award.<br />

The various factors a court will take into consideration are dealt<br />

with extensively in the full judgement (so you might have to read<br />

it after all, sorry!).<br />

Among other things, the court will need to be satisfied that No<br />

Share Sherlock’s soon-to-be ex-spouse has made a contribution<br />

(monetary or otherwise) towards the accumulated assets they now<br />

want to share.<br />

Bottom line<br />

In a nutshell, what the EB v ER and KG judgement does, is to sound<br />

the warning for those who are married or getting married: they are<br />

in for a financial partnership of sorts, whether they like it or not.<br />

72 www.bluechipdigital.co.za

FINANCIAL PLANNING | Legislation<br />

BLUE<br />

CHIP<br />

What do the critics say? (Extra reading for over-achievers)<br />

The conservative view is that the judgement:<br />

• Undermines established legal principles like freedom of<br />

contract, the sanctity of contract and the established legal<br />

principle of “pacta sunt servanda” (a Latin term which means<br />

that contracts must be honoured).<br />

• Fails to respect a couple’s right autonomously to choose their<br />

preferred matrimonial regime and seeks paternalistically to<br />

impose a concept of “forced sharing”.<br />

• Has the effect of promoting uncertainty about the ultimate<br />

potential economic consequences of marriage.<br />

• Will open the floodgates to a tsunami of litigated divorces,<br />

initiated by disgruntled spouses keen to see whether they<br />

can persuade a court to exercise this newfound discretion in<br />

their favour.<br />

• The liberal view is that the judgement is a triumph for our<br />

constitutional democracy, in that it develops our law by<br />

empowering courts to promote substantive gender equality.<br />

The argument is that:<br />

• In many spheres of South African society there is still a very real<br />

and substantial power imbalance between men and women<br />

(largely because of still prevalent cultural and social norms).<br />

• As a result of their (still) generally lower economic and<br />

occupational status in society, women are still (usually) in<br />

a weaker bargaining position than men when it comes to<br />

negotiations regarding the economic consequences of marriage.<br />

• Because of this pervasive and continuing power imbalance, it is<br />

disingenuous to argue that the choice of marital regime always<br />

represents an exercise by both parties of their autonomous<br />

“free will”.<br />

• In the spirit of gender-sensitive realism and promoting<br />

substantive gender equality (rather than just lip service to a<br />

concept), courts should be (and now are) able to come to the<br />

assistance of parties who may otherwise find themselves victims<br />

of exploitative agreements that they cannot, with a straight face,<br />

be said to have “agreed freely” to.<br />

No prizes for guessing which view I share. <br />

Hannah Wilson, Director, Simplifi Law<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />

DEVELOPMENT | Internships<br />

Transformation through inclusive<br />

approaches to internships<br />

The Independent Financial Advisor (IFA) Internship, which<br />

has been running since 2016, is one of a two-pronged<br />

transformation initiative funded by various ASISA<br />

member companies 1 through the ASISA Enterprise and<br />

Supplier Development (ESD) initiative. While one programme<br />

focuses on supporting and developing existing black-owned IFA<br />

practices in a 12-month programme, the year-long IFA internship<br />

seeks to build a pipeline of young black talent into the IFA space.<br />

The ASISA Academy has delivered the IFA Internship since<br />

its inception in 2016, and since then 252 black graduates from<br />

various universities around the country have come through the<br />

programme. This includes the 31 interns who are currently entering<br />

the final three months of their internship which will conclude in<br />

February 2024.<br />

Many university graduates emerge from their tertiary education<br />

experience poorly prepared for the professional world of work.<br />

Add to this the complexity that most black youth face in our<br />

country – poverty, hardship, unemployed or underemployed<br />

parents and siblings, many of whom have not seen the inside of<br />

a university lecture hall, let alone a corporate boardroom. You’ve<br />

barely survived life as a student, now you are expected to take on<br />

the working world and be the consummate professional, and you<br />

may well have to shoulder the responsibility of taking care of your<br />

ASISA Academy provides<br />

graduates applying for a<br />

spot on the IFA internship<br />

with a head start.<br />

family members financially. An added burden is that of student<br />

debt you may have accumulated because – go figure. Can we even<br />

begin to fathom this scenario?<br />

Through the generous sponsorship of ASISA members,<br />

ASISA Academy provides graduates applying for a spot on the<br />

IFA internship with a head start, firstly by providing them with<br />

guidance on what to expect during job interviews and how to<br />

show up for them. To those who are selected for the programme,<br />

a two-week work readiness course is delivered, which helps them<br />

bridge the gap between student life and working in a professional<br />

work environment.<br />

Topics not only ensure that they understand how the financial<br />

services industry hangs together and what the business of an<br />

independent financial advisory practice is all about but also<br />

include a variety of the world of work skills, often referred to as<br />

74 www.bluechipdigital.co.za

DEVELOPMENT | Internships<br />

BLUE<br />

CHIP<br />

soft skills. These include topics like office etiquette, dress code,<br />

grooming, effective communication, conflict management,<br />

teamwork, mental health and wellbeing, resilience and dealing<br />

with failure, managing personal finances and so forth.<br />

The feedback we receive from interns after the work readiness<br />

course is always highly affirming of how the content helped to<br />

prepare them for the world of work. They emerge from those two<br />

weeks of training well-equipped with the knowledge and skills to<br />

start their journey towards becoming a professional.<br />

The Academy also allocates a dedicated mentor to each intern,<br />

who has years of life experience coupled with a sincere interest in<br />

seeing young people thrive in their first year of work.<br />

While challenges form part of the experience, it is encouraging<br />

that the successes by far outweigh any of the challenges we have<br />

encountered while running this internship. Each year, the Academy<br />

sees more than <strong>90</strong>% of interns completing the programme and<br />

between 80% and 85% of interns being retained by their host<br />

practices. The remaining interns are fortunate in that they are<br />

quickly snapped up by the broader industry.<br />

While the overall success lies within the dynamic partnership<br />

between programme sponsors, the ASISA Academy and the IFA<br />

host practices who provide interns with 12 months of full-time,<br />

on-the-job work experience, a great deal of credit must go to<br />

the host practices who keep making it work year after year. We<br />

are most delighted to see certain practices growing their teams<br />

by absorbing their interns and continuing to participate in the<br />

programme by taking a new intern each year.<br />

Here are a few additional reasons why we believe certain host<br />

employers make a success of the internship year after year:<br />

• Commitment to diversity and inclusion.<br />

• Bringing their teams on board and ensuring open channels<br />

of communication.<br />

• Having the right people conducting the interviews and selections.<br />

• Selecting the graduate who is the best fit for their business.<br />

• Excellent onboarding processes that are well-implemented.<br />

• Treating the interns respectfully and like adults.<br />

• Providing clear reporting lines.<br />

• Creating a welcoming environment for the intern and working<br />

systematically with the set of learning outcomes provided.<br />

• Having cultural intelligence (CQ) – an awareness of the cultural<br />

differences that exist between people working in the business<br />

and celebrating this rather than shying away from it.<br />

• Exposing interns to learning opportunities such as product training.<br />

• Making time. Time to work and time to play. Time to train, give<br />

feedback, chat and learn about their intern.<br />

• Involving their intern in as much as they can.<br />

• Giving their intern a clear set of responsibilities and holding<br />

them accountable.<br />

• Genuinely caring. <br />

1<br />

Founding Sponsors: Allan Gray, Coronation, M&G Investments and Ninety One<br />

Other Sponsors: Camissa Asset Management, Colourfield, Marriott, Old Mutual, Perpetua Investment<br />

Managers and Swiss Re<br />

The ASISA Intern Programme.<br />

Alicia Davids, CEO, ASISA Academy<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />

FINANCIAL PLANNING | Legislation<br />

Corporate governance: a<br />

compliance or business issue?<br />

As highlighted in one of my previous articles, the Conduct<br />

of Financial Institutions (COFI) Bill is founded on culture<br />

and governance. Where a previous article focused on<br />

culture, this article puts the spotlight on corporate<br />

governance. It will show how, contrary to popular belief, it is not a<br />

compliance issue but a business issue.<br />

Sadly, as a result of the wave upon wave of onerous rulesbased<br />

regulatory reform that has challenged the financial<br />

services industry since the turn of the century, the concept<br />

of governance has left a stain of compliance in the minds of<br />

many industry stakeholders, instead of a set of best practice<br />

principles and guidelines. It may be a good idea to test your<br />

attitude towards governance.<br />

If your first response is to associate corporate governance<br />

with compliance, it may prevent you from seeing governance as<br />

your friend instead of an enemy. If that is the case, one of the first<br />

things you will have to do is to adopt an attitude of best practice,<br />

not compliance. Generally, compliance drags you down, but the<br />

desire to be the best inspires you to succeed in every possible way.<br />

Replacing a compliance mindset with a best-practice mindset will<br />

go a long way to preparing your business for success.<br />

What is corporate governance?<br />

Corporate governance is the system of principles, best practices,<br />

rules and processes by which a company is directed, controlled<br />

and managed. It essentially involves balancing the interests of a<br />

company’s many stakeholders, which can include shareholders,<br />

directors, senior management, employees, customers, suppliers,<br />

lenders, government and the community. Corporate governance<br />

includes practically every aspect of management.<br />

In his book, The Corporate Citizen, Prof Mervyn King defined<br />

good governance as fairness, accountability, responsibility and<br />

transparency on a foundation of intellectual honesty. In his view, in<br />

arriving at their decisions, directors have to thoroughly understand<br />

the duties of good faith, care, skill and diligence 1 . According to<br />

King, it is not good governance when a compliance officer reports<br />

to a board that a company has complied with the code and the<br />

rules of governance, without the board applying its mind as to how<br />

the company should be governed. 2<br />

“Governance is about judgement calls and process.”<br />

– Mervyn King 3<br />

The benefits of good corporate governance<br />

Corporate governance is of fundamental importance to any<br />

business, big or small, simply because good corporate governance<br />

leads to sustainable business success that can benefit all<br />

stakeholders, while bad governance can lead to scandal and ruin.<br />

There are many, many examples of failed enterprises globally that<br />

confirm this fact.<br />

There can be no doubt that sound corporate governance is good<br />

for business and that it lays the foundation for the sustainability of<br />

any financial services provider. In reality, most successful businesses<br />

strive to have exemplary corporate governance. For many, if not<br />

most stakeholders, it is not enough for a company to be profitable;<br />

it also must demonstrate good corporate citizenship through<br />

ethical behaviour; sound policies, procedures and corporate<br />

governance practices as well as environmental awareness.<br />

Corporate governance guides the leadership of firms to align<br />

the interests of clients, shareholders, directors, management and<br />

employees, and it helps to build trust between all the stakeholders.<br />

Corporate governance can give all stakeholders a clear idea of a<br />

company’s direction and business integrity. It promotes long-term<br />

financial viability, opportunity and returns. It serves as a sound<br />

foundation to facilitate the raising of capital, if needed. Good<br />

corporate governance can translate to rising share prices and it can<br />

reduce the potential for financial loss, risks and corruption. It lays<br />

the foundation for resilience and long-term sustainable success as<br />

well as increased shareholder value.<br />

Good corporate governance can<br />

translate to rising share prices.<br />

How can the legislation help providers to succeed?<br />

If you have a compliance mindset, you will probably only see<br />

the rules and obligations, as highlighted below, and not the<br />

sound, guiding principles that will assist you as a business to be<br />

competitive at the highest level in our industry. Hopefully, the<br />

comments in the next section of the article will help you to see<br />

how these principles, captured in the legislation, will help you to<br />

establish best-practice principles in your business that will give<br />

you a sustainable competitive advantage.<br />

Obligations of governing body<br />

Section 15. 4<br />

(1) The governing body of a financial institution is accountable for:<br />

Best practice: Where there is no accountability, there is no<br />

leadership responsibility, and where there is no leadership<br />

responsibility, scandal and ruin usually follow.<br />

(a) Compliance with the requirements of this Act; 5<br />

76 www.bluechipdigital.co.za

FINANCIAL PLANNING | Legislation<br />

BLUE<br />

CHIP<br />

Best practice: Every game has its rules aimed at competing<br />

safely and fairly for the benefit of all. Every business must have<br />

a defensive strategy, which is equally important to an offensive<br />

strategy. Compliance with legislation usually reduces risk to all<br />

stakeholders.<br />

(b) Approval of the governance arrangements referred to in section 16;<br />

Best practice: The process before approval will serve as an<br />

opportunity to plan, consider, strategise, deliberate and agree<br />

on the best-practice principles that will enable your business<br />

to compete in a very tough and onerous industry. Approval will<br />

confirm the company policy and must be communicated to all<br />

the internal stakeholders. When you consider your governance<br />

arrangements from a best-practice point of view, you will comply<br />

with the legislation by default in most cases. If you approach it by<br />

asking, “What do I have to put in place to be the most honourable<br />

and fierce competitor in the marketplace?” you will set yourself up<br />

for success and comply at the same time.<br />

(c) Overseeing the establishment, implementation, subsequent review<br />

of, and continued compliance with, the governance arrangements<br />

referred to in section 16.<br />

Best practice: Approval of the best-practice governance<br />

arrangements without ensuring that the arrangements are<br />

properly implemented, maintained and reviewed from time to<br />

time will be meaningless.<br />

Governance arrangements<br />

Section 16: 6<br />

1. A financial institution must document, establish, implement,<br />

monitor and review the effectiveness of governance arrangements<br />

that are reasonably necessary to ensure compliance with the<br />

requirements in this Chapter and any related conduct standard<br />

or joint standards.<br />

Best practice: To document conduct standards and governance<br />

arrangements that are reasonably necessary to ensure compliance<br />

with the requirements in this Chapter and any related standards<br />

can serve as a business manual for all the stakeholders – a common<br />

point of reference. It can also serve as a sound training manual for<br />

management, representatives and support staff.<br />

2. The governance arrangements referred to in subsection (1) must:<br />

(a) Promote accountability of key persons and address roles,<br />

responsibilities and duties of the governing body and key persons;<br />

Best practice: Again, where there is no accountability, there is<br />

no leadership responsibility, and where there is no leadership<br />

responsibility, scandal and ruin usually follow. It is just a matter<br />

of time.<br />

(b) Ensure that key persons possess the necessary skills, knowledge<br />

and expertise, and have appropriate resources, to fulfil their<br />

functions, and perform those functions in a manner consistent<br />

with Part 1;<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />

FINANCIAL PLANNING | Legislation<br />

Best practice: I believe that every key person would agree that<br />

possessing the necessary skills, knowledge, and expertise, as<br />

well as having appropriate resources to fulfil their functions,<br />

and perform those functions properly are basic requirements<br />

for any firm to be successful over the long term.<br />

(c) Provide for mechanisms to identify and, where appropriate,<br />

remove practices that, or persons whose, conduct materially<br />

increases the risk of the financial institution not complying with<br />

Part 1;<br />

Best practice: I firmly believe that the reasonable key person,<br />

who understands the principle of accountability to his/her firm,<br />

would want to reduce or eliminate risk to the business and its<br />

stakeholders. From a best practice point of view, to identify and,<br />

where appropriate, remove practices that, or persons whose,<br />

conduct materially increases the risk of the financial institution<br />

not complying, would be a basic part of the job description.<br />

(d) Be proportionate to the nature, size, scale and complexity of<br />

the conduct risks or business model of, and activities performed<br />

by, the financial institution;<br />

Best practice: Respectfully, the principle of proportionality<br />

is something that makes absolute sense, and looks good on<br />

paper, but it remains to be seen how exactly the regulator is<br />

going to apply it in practice. This aspect will be addressed in<br />

a future article.<br />

(e) Provide for management processes and responsibilities and<br />

the establishment, implementation and management of control<br />

functions within the financial institution;<br />

Best practice: Many respected and bestselling authors on<br />

business have made the point that bad systems will trump good<br />

people every time. It is a fundamental fact that sound systems<br />

and processes create effectiveness and efficiencies in the<br />

business that can be applied consistently. It is simple – sound<br />

policies and procedures in any business are good for business.<br />

(f) Deal with internal and external remuneration and<br />

compensation practices in a manner that promotes compliance<br />

with Part 1;<br />

Best practice: Best practice remuneration and compensation<br />

policies will establish an attractive employment value<br />

proposition and will ensure the sustainability of the business.<br />

(g) Demonstrate how the licensed financial institution will comply<br />

with this Act; and<br />

Best practice: Sound, written policies, procedures and<br />

oversight have many advantages for the business, as already<br />

highlighted above.<br />

(h) Address and provide for any additional matters relating to<br />

governance arrangements required by this Act.<br />

Best practice: Leading key persons will go beyond the<br />

obvious to ensure that they can create a very competitive and<br />

sustainable business.<br />

There is no question in my mind that leading financial services<br />

providers will excel in corporate governance, not because they<br />

have to, but because they want to.<br />

1<br />

Mervyn King, The Corporate Citizen, page ix<br />

2<br />

Mervyn King, The Corporate Citizen, page 12<br />

3<br />

Mervyn King, The Corporate Citizen, page 19<br />

4<br />

Conduct of Financial Institutions Bill<br />

5<br />

The Conduct of Financial Institutions Act, read with the Financial Sector Regulation Act.<br />

6<br />

Conduct of Financial Institutions Bill<br />

Anton Swanepoel, Founder, Trusted Advisor<br />

78 www.bluechipdigital.co.za

FPI | Certification<br />

BLUE<br />

CHIP<br />

Next Generation<br />

Certification Standards<br />

Want to become a CERTIFIED FINANCIAL PLANNER®? The Financial Planning Institute introduces the Next<br />

Generation Certification Standards.<br />

The FPI is excited to introduce the Next Generation<br />

Certification Standards for the CERTIFIED FINANCIAL<br />

PLANNER® (CFP®) designation. The assessment process<br />

to become a CFP® professional member of the FPI will be<br />

amended from 1 January 2025 to align closely with the current<br />

international requirements for CFP® certification.<br />


When determining the competencies of financial planner<br />

candidates, the FPI assesses both their knowledge and whether they<br />

possess the required financial planning skills and abilities.<br />

In line with international trends, the FPI is adapting the assessment<br />

processes for CFP® to include a practical component in the form of a<br />

Capstone 1 course and a financial plan assessment.<br />

The entire assessment process, across the four Es required for<br />

certification (education, examination, experience and ethics), is<br />

being streamlined. This will ensure that a new CFP® professional<br />

is evaluated practically across the knowledge, skills and abilities<br />

components of financial planning, which includes the drafting of<br />

a financial plan.<br />


The CFP® professional competency examination in its current format<br />

will be discontinued at the end of 2024. From 2025, candidates on<br />

the two different pathways to CFP® certification will be required to<br />

complete the steps as shown in the table successfully.<br />

How does it affect candidates on our CFP® pathway?<br />

If you obtained your recognised underlying qualification during<br />

or before 2023, you will be encouraged to complete the FPI<br />

Professional Competency Examination (PCE) in its current format<br />

before the end of 2024. Should you not attempt the PCE, or not<br />

be successful in passing the PCE at this time, you will have<br />

to complete the three components of the CFP® RPL pathway<br />

examination requirement from 2025 onwards (multiple choice<br />

examination, Capstone course and financial plan).<br />

The FPI encourages all qualifying candidates to complete this<br />

examination and apply for CFP® membership as soon as possible.<br />

There will be four examination opportunities available in 2024.<br />

Visit www.fpi.co.za to register for the February (8-9) or April<br />

(25-26) PCE exams.<br />


How will the FPI ensure that the standard of new entrants to<br />

the CFP® designation is upheld?<br />

Although the process and method of assessment is changing,<br />

it is still based on the global international standards and<br />

requirements for CFP® professionals. Education requirements<br />


Education Examination Experience Ethics<br />

Obtain the recognised underlying<br />

qualification at an FPI recognised<br />

education provider.<br />

Complete the Capstone course<br />

(practical online course on how to apply<br />

the knowledge component in practice).<br />

Prove three years’ relevant<br />

financial planning experience as<br />

assessment for skills and abilities.<br />

Adherence to the Code of Ethics and<br />

professional responsibility and practice<br />

standards.<br />

and<br />

or<br />

or<br />

Complete the qualification’s<br />

Integrated Case Study Module from<br />

2024 onward to assess the knowledge<br />

component for certification.<br />

Successfully complete the<br />

mentorship programme.<br />

and<br />

Submit a financial plan as the final<br />

form of examination assessment for<br />

knowledge, skills and abilities.<br />

Complete the mentorship programme<br />

as assessment for skills and abilities.<br />

www.bluechipdigital.co.za<br />


BLUE<br />

CHIP<br />

FPI | Certification<br />


Education Examination Experience Ethics<br />

Hold an advanced degree or<br />

designation as approved per the<br />

current challenge examination criteria.<br />

Pass the FPI multiple choice CFP®<br />

examination for knowledge assessment<br />

for entry into the Capstone course.<br />

and<br />

Prove five years’ relevant financial<br />

planning experience as assessment<br />

for skills and abilities.<br />

Adherence to the Code of Ethics<br />

and professional responsibility<br />

and practice standards.<br />

Complete the Capstone course.<br />

and<br />

Submit a financial plan as the final<br />

form of examination assessment for<br />

knowledge, skills and abilities.<br />

are still set at an NQF level 8, and the Capstone course will<br />

allow candidates to apply the knowledge in practice. The<br />

financial plan assessment will evaluate whether candidates<br />

have mastered the skills and abilities to apply this knowledge<br />

at the level expected of a CFP® professional.<br />

Does this mean that I must write an extra examination to<br />

become a CFP® professional?<br />

The above should not be seen as an additional examination but<br />

rather a different format of assessment in that the candidates<br />

will from 2025 onwards not write “another” exam, but rather<br />

submit a portfolio of evidence (financial plan) after completing<br />

the Capstone course. The exam written at the universities, from<br />

2025 onwards, will be the standard-setting examination that tests<br />

for minimum competence across all FPI-recognised educational<br />

providers. Only candidates who obtained their qualification before<br />

or during 2023 who do not attempt or pass the PCE by the end of<br />

2024 will be required to also pass the multiple-choice examination<br />

to gain access to the Capstone course.<br />

Will the costs for completing the Capstone course and<br />

submitting a financial plan be significantly different to the<br />

current PCE examination fees?<br />

No. The FPI will ensure that the cost for candidates is similar to the<br />

registration cost of the PCE in its current form.<br />

What is Capstone course format?<br />

The Capstone course will be an online course with an eight to<br />

10-week timeline to completion. It will run throughout the year and<br />

will include live sessions, pre-recorded material, reading material<br />

and various types of assessments, etc. It will be aimed at assisting<br />

candidates to apply the knowledge obtained in the education<br />

requirement to the everyday practice of financial planning.<br />

How will the financial plan assessment work?<br />

After completion of the Capstone course, a candidate will be<br />

provided with a case study. This candidate will have a prescribed<br />

time to develop and submit a financial plan to the FPI that meets<br />

the requirements for a financial plan as prescribed. Once submitted,<br />

this financial plan will follow an assessment process by the FPI<br />

to determine whether the candidate has met the competency<br />

requirement for this assessment component.<br />

What are the dates for the examinations and how do I register?<br />

Visit our website at www.fpi.co.za or email certification@fpi.co.za<br />

for more information. <br />

Nici Macdonald, CFP®,<br />

Head of Certification and<br />

Standards, FPI<br />

1<br />

A Capstone course is a project<br />

that serves as the culminating and<br />

integrative praxis experience of an<br />

educational programme. It is the final<br />

culmination of a learning experience,<br />

in this case, the combination of the<br />

knowledge, skills and abilities a<br />

candidate has to master during their<br />

studies.<br />

2<br />

Recognition of Prior Learning<br />

3 <br />

https://fpi.co.za/membership/<br />

professional-membership/education/<br />

80<br />


Partner with us, become an FPI<br />

Approved Professional Practice TM<br />

FPI Approved Professional Practice TM<br />

firms<br />

For more information, get in touch with us<br />

Email us<br />

businessdevelopment@fpi.co.za<br />

Contact us:<br />

Visit our website<br />

+27 11 470 6000 www.fpi.co.za

Hooray! Your file is uploaded and ready to be published.

Saved successfully!

Ooh no, something went wrong!