Blue Chip Journal Issue 75 - April 2020

EDITOR’S NOTE Gregory

EDITOR’S NOTE Gregory Penfold, Editor Blood on the floor For ornithologists, a black swan is a large waterbird that breeds mainly in the south-east and south-west regions of Australia, but for economists, a black swan is an extremely rare, unpredictable event that exceeds normal expectations and carries potentially severe consequences in its wake. Investopedia lists examples including the dot-com bubble of 2001, the financial crisis of 2008, and the hyperinflation experienced by Zimbabwe in the same year, which peaked at a percentage rate of more than 79.6-billion. When Investopedia updates its black swan entry, the list will surely be expanded to include the events triggered by the discovery in December 2019 of a new coronavirus, Covid-19, in Wuhan, China. The subsequent worldwide epidemic has delivered a staggering blow to financial institutions and investors around the world, with some of the world’s most profitable companies hemorrhaging value as the longest-running bull market in history abruptly grew a set of claws and began to growl. This doesn’t mean it’s necessarily time for investors to panic. As Dave Kovalevski points out, writing for The Motley Fool, “Over the long-term – through the 2001 dot-com bubble, the 9/11 terrorist attacks, the housing crisis, and the Great Recession – the S&P 500 has a compound annual return of 10% over the last 30 years, 6% over the last 20 years, and 13.5% over the last 10 years ended Dec. 31, 2019. Patience is important.” By the same token, clients are not going to be fobbed off with “keep calm and carry on”. They are going to ask questions for which the financial advisor would be well advised to prepare. For Kovalevski, the most pressing questions that clients should be asking are: Should I reassess my risk tolerance? What is the outlook for the economy and markets? Is this a buying opportunity? Should ordinarily risk-averse clients now tough it out through the big market swing to capture long-term returns? What are the implications of this bear market for retirement or education expenses? Is there a recession on the horizon? Is now a good time to buy? Certainly, for investors who believe that the likes of Sasol will recover from the carnage, now is a golden opportunity. These issues need to be urgently discussed with clients, but preferably not face to face. Perhaps now is also a good time to implement that digitisation strategy that was deemed a nice-to-have a few weeks ago. These extraordinary changes are going to have a massive impact on the financial planning industry. Advisors are encouraged to join the collective conversation and email their views, solutions and experiences to Blue Chip. Blue Chip Journal – 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 carries contributions from FPI, carrying FPI branding, and other leading industry figures, covering all aspects of the financial planning industry. A total of 10 000 copies of the publication are distributed directly to every CERTIFIED FINANCIAL PLANNER® (CFP®) in the country, while the Blue Chip e-newsletter (launch date January 2020) reaches the full FPI membership base. FPI members are able to earn one non-verifiable Continuous Professional Development (CPD) hour per edition of the print journal (four per year) under the category of Professional Reading. Blue Chip is also distributed at key FPI events including the FPI Professionals Convention, the Financial Planner of the Year Awards Dinner and regional FPI Masterclasses. Special advertising packages in Blue Chip are available to FPI Corporate Partners, FPI Recognised Education Providers and FPI Approved Professional Practices. 6 www.bluechipdigital.co.za