The Financial Planner Issue 39 (4 of 2015)

Issue 39 (4 of 2015)

change is

inevitable

growth is optional FPSB visits SA

Advocating for the profession Official Journal of the Financial Planning Institute of Southern Africa

17351/E

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THERE ARE MANY TAX-FREE FUNDS ON OFFER. FEW OFFER THE PERFORMANCE THAT WE DO. Prudential Enhanced Income Fund Prudential Inflation Plus Fund Prudential Balanced Fund Prudential Enhanced SA Property Tracker Fund Prudential Dividend Maximiser Fund Source: Morningstar

For more information contact our Client Services team on 0860 105 775, or visit: prudential.co.za Consistency is the only currency that matters.

Source: Morningstar data for periods ending 31 October 2015. Prudential Portfolio Managers Unit Trusts Ltd (Registration number: 1999/0524/06) is an approved CISCA management company (#29). Assets are managed by Prudential Investment Managers (South Africa) (Pty) Ltd, which is an approved discretionary Financial Services Provider (#45199). The Trustee’s/Custodian details are: Standard Bank of South Africa Limited – Trustees Services & Investor Services. 20th Floor, Main Tower, Standard Bank Centre, Heerengracht, Cape Town. The T class investment is a tax-free savings product in terms of section 12T(8) of the Income Tax Act, 1962. T class investments are only open to natural persons that are South African residents. An individual may contribute up to a maximum of R30 000 per tax year or R500 000 for their lifetime into tax-free savings products. Any contributions above these limits will be taxed by the South African Revenue Services (SARS) at 40% of the excess contribution value. All returns from such products will be free of all South African tax in the hands of the individual who owns them, subject to the SARS defined thresholds. It is the responsibility of the individual investor to ensure these limits are met and the manager bears no liability for any actions performed by the individual investor which may result in the limits being exceeded. No transfer may be done unless it is to another tax-free investment in the name of the investor. All transfers must be accompanied with a Transfer Certificate in the format prescribed by SARS. In terms of regulation, transfers from one product service provider to another product service provider will not be allowed until 1 March 2016. Collective Investment Schemes (unit trusts) are generally medium-to long-term investments. Past performance is not necessarily a guide to future investment performance. Unit trust prices are calculated on a net asset value basis. This means the price is the total net market value of all assets of the unit trust fund divided by the total number of units of the fund. Any market movements – for example in share prices, bond prices, money market prices or currency fluctuations – relevant to the underlying assets of the fund may cause the value of the underlying assets to go up or down. As a result, the price of your units may go up or down. Unit trusts are traded at the ruling forward price of the day, meaning that transactions are processed during the day, before you or the manager know what the price at the end of the day will be. The price and therefore the number of units involved in the transaction are only known on the following day. The unit trust fund may borrow up to 10% of the fund value, and it may also lend any script (proof of ownership of an investment instrument) that it holds to learn additional income. A Prudential unit trust fund may consist of different fund classes that are subject to different fees and charges. The Prudential Unit Trusts (Tax-free) Collective Investment Scheme (CIS) summary with all fees and maximum initial and ongoing adviser fees is available on our website. One can also obtain additional information on Prudential’s products on the Prudential website. The fund may hold foreign securities including foreign CIS funds. As a result, the fund may face material risks. The volatility of the fund may be higher and the liquidity of the underlying securities may be restricted due to relative market sizes and market conditions. The fund’s ability to settle securities and to repatriate investment income, capital or the proceeds of sales of securities may be adversely affected for multiple reasons including market conditions, macro-economic and political circumstances. Further, the return on the security may be affected (positively or negatively) by the difference in tax regimes between the domestic and foreign tax jurisdictions. The availability of market information and information on any underlying sub-funds may be delayed. The manager may, at its discretion, close your chosen unit trust fund to new investors and to additional investments by existing investors to make sure that it is managed in accordance with its mandate. It may also stop your existing debit order investment. The manager makes no guarantees as to the capital invested in the fund or the returns of the fund. Excessive withdrawals from the fund may place the fund under liquidity pressure and, in certain circumstances; a process of ring fencing withdrawal instructions may be followed. Fund prices are published daily on the Prudential website. These are also available upon request. The performance is calculated for the portfolio. Individual Investor performance may differ as a result of initial fees, the actual investment date, the date of reinvestment and dividend withholding tax. Purchase and repurchase requests must be received by the manager by 13h30 SA time each business day.

Contents

Issue 39 (4 of 2015)

change is

inevitable

growth is optional

4

Letter from FPI

6

Profiles Member profiles FPI Approved Professional Practice

FPSB visits SA

TM

profiles

Advocating for the profession

18

Official Journal of the Financial Planning Institute of Southern Africa

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Client Engagement

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Highly-regulated broker environment: A challenge or an opportunity?

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40

Industry news & events Boston Calling: Feedback from the FPA Annual Conference

FPI membership number:

A national qualifications framework at work

Company: 44

VAT no:

Investment The Market Turbulance Trap

Title:

The long game will work out for China

Initial: Surname:

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Postal address:

International news Financial planning – a recognised global profession South Africa contributes to Financial Planning Standards Board’s Global Body of Knowledge for Financial Planning Profession

Code:

52

Tel:

Practice Management Where are all the clients

Fax: 56

E-mail:

Research Comparing SA Annuity options at retirement CFP® professionals lead the pack in Sanlam’s top100 professionals

Signature:

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Book Review The trust factor

The Financial Planner www.fpi.co.za Tel: 086 1000 FPI (374)

Tsholofelo Dihutso, CPRP Editor Communications Specialist media@fpi.co.za

Editorial enquiries: media@fpi.co.za

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Postal address: PO box 6493, Weltevredenpark, 1715 Street Address: 84 Sophia Street (Cnr 11th Avenue), Fairland, Johannesburg, 2170

Advertising: Michelle Baker michelle.baker@mediamarx.co.za (031) 764 6725 (073) 137 1231

Opinions expressed in this publication are those of the authors and do not necessarily reflect those of this journal, its editor or its publishers. The mention of specific products in articles or advertisements does not imply that they are endorsed or recommended by this journal or its publishers in preference to others of a similar nature, which are not mentioned or advertised. While every effort is made to ensure accuracy of editorial content, the publishers do not accept responsibility for omissions, errors or any consequences that may arise therefrom. Reliance on any information contained in this publication is at your own risk. The publishers make no representations or warranties, express or implied, as to the correctness or suitability of the information contained and/or the products advertised in this publication. The publishers shall not be liable for any damages or loss, howsoever arising, incurred by readers of this publication or any other person/s. The publishers disclaim all responsibility and liability for any damages, including pure economic loss and any consequential damages, resulting from the use of any service or product advertised in this publication. Readers of this publication indemnify and hold harmless the publishers of this magazine, its officers, employees and servants for any demand, action, application or other proceedings made by any third party and arising out of or in connection with the use of any services and/or products or the reliance of any information contained in this publication.

letter from fpi

Advocating for the profession

2015 brought with it some major opportunities and, thanks to the support from our staff, members and Board of Directors we were prepared and took these in our stride. The biggest stride of them all was in the area of our long standing quest for financial planning to attain strategic parity with other recognised and respected professions like medicine and engineering.

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hroughout 2015 we have been in perpetual overdrive, advocating to regulators, policymakers and industry on how and why recognising as well as ring-fencing financial planning as a separate and evolving professional practice could lead to better outcomes for consumers as well as benefit all South Africans.

“It starts with me”

We didn’t spare energies in this endeavour. We had over 40 meetings with the Financial Services Board (FSB), National Treasury and a number of other stakeholders and responded to more than eight government proposals from Retail Distribution Review (RDR), Pension Funds Reform to Financial Sector Regulation (FSR) Bill – a matter which is currently being debated in Parliament.

Whether it was recertifying your membership on time, responding to our calls to volunteer on the FPI MYMONEY123TM programme, serving on various tasks teams and committees, informing your clients about the CFP® mark, posting on media platforms and participating in press engagements; all your efforts are making a tremendous difference to helping our mission to establish financial planning as a profession and to make consumers aware that our members are there to provide professional guidance. I wish to take this opportunity to appeal to other members who are yet to embark on the FPI “It starts with me” campaign to do so in the New Year.

More information about the programme can be found on the FPI website.

Visit of FPSB CEO We were privileged to have the chief executive officer of Financial Planning Standards Board (FPSB), Noel Maye, visit South Africa in September 2015 to lend a hand to our advocacy efforts. During his visit, we fruitfully engaged with the leadership of National Treasury, FSB, South African Qualifications Authority (SAQA), FAIS Ombud, Pension Funds Adjudicator (PFA) as well as leaders of FPI Corporate PartnerTM companies and FPI Approved Professional PracticeTM firms.

As we look back at 2015, as much as it’s been a year of the most delicate negotiations and engagements with different key industry role players and stakeholder, often with conflicting interests, we are indeed thoroughly satisfied with the progress that we have made on the advocacy front.

Update on FPSB Global Member Meeting The leadership of FPI recently represented South Africa at the biannual, in person, FPSB Global Member Meeting in Tokyo. This meeting was attended by representative of FPSB’s 26 affiliates around the world as well as government representatives from Japan.

I was privileged to have been asked by FPSB leadership to present to the global community on regulatory developments in South Africa, our regulatory engagement strategy and to give guidance to the global community on how best to approach advocacy.

At FPSB’s meeting we discussed and approved the following: • FPSB focus area for 2016 • The release of results of recently conducted FPSB global consumer research on financial planning as well as consumer perceptions about the CFP® designation.

FPSB’s Board also announced the appointment of FPI director and chairperson of the FPI Advocacy Committee, Gerhardt Meyer, CFP®, to serve a four year term on its Board. We are certainly proud of this appointment as we know that Mr Meyer will proudly carry South Africa with him to the rest of the world.

We are enormously grateful to you, our members, for your support and wholehearted embrace of the ideals of the FPI “It starts with me” campaign. You are our one true north. You are our focus, our passion and our purpose.

Focus for 2016 We are on a roll where advocacy is concerned and you can expect to see us put in an even bigger effort on this front in 2016. We will simply not relent until financial planning reaches strategic parity with other recognised and respected professions in South Africa.

Our theme for 2016 is Engagement. We want to deepen our engagement efforts with our members in 2016. We want to make sure that we thoroughly understand you, your business, your joys and your fears. We want to make sure that all the things we do in 2016 and beyond reflect the aspirations of our members.

Powering down It’s been a year of working overdrive. It’s now December, so we are starting to power down our engines, planning to recharge over the festive season and to come back in 2016 more energised than ever before.

From FPI, we wish you a happy holiday season. Our sincere thanks for your goodwill and loyalty throughout the past year. We look forward to serving you better in 2016!

Godfrey Nti Chief Executive Officer | Financial Planning Institute (FPI)

It is also now official that FPI will serve as the convenor of the global financial planning standards setting community in October 2017. FPI will be hosting FPSB’s Global Member meeting in Cape Town.

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Profiles

Member

Profiles In this final issue of 2015, Wende Davids interviewed three CFP® professionals who were also recognised at the 2015 Awards Ceremony. She caught up with Bruce Fleming, CFP® and Mark MacSymon, CFP®, who were both recognised as finalist of the 2015 FPI Financial Planner of the Year Award.

Wende also interviewed Gerald Mwandiambira, CFP®, who for the second time in a row, has won the FPI Media Award.

By Wende Davids

Customer Experience Officer, Financial Planning Institute (FPI)

Bruce Fleming, CFP®

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Mark MacSymon, CFP®

Gerald Mwandiambira, CFP®

e c u r B g n i m Fle Bruce 速 Fleming, CFP

Executive Head: Private Clients, Consolidated 2015 FPI Financial Planner of the Year Finalist

You have done really well in the FPI Financial Planner of the Year award. This is your second year as a finalist. What has been your greatest learning that you have taken away from the competition?

The FPI Financial Planner of the Year is not just a competition. By its very nature you not only need to be a very good financial planner with an in depth knowledge of all things relating to financial planning. You also need to be up to date. Your business needs to be sound. Your compliance and

practice management processes need to be beyond reproach. You are scrutinised by the leaders of our industry, so there is nowhere to hide. Becoming one of the finalists in the FPI Financial Planner of the Year competition illustrates that not only can I consider myself one of the top financial planners in the country but that my team at Consolidated Financial Planning are also one of the best.

Consolidated has had many of their financial planners be either winners or finalists in the FPI Financial Planner of the Year competition; is it something

that the company encourages their planners to partake in and why do the planners of your organisation value the competition so much?

At Consolidated, we encourage our financial planners to enter every year because we hold the competition in such high esteem.

Every one of our financial planners is held accountable to the high industry standards set by FPI, and we are proud to showcase the skills and expertise within our business.

More importantly, we want to continually stretch and challenge ourselves to be the

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M best we can be in our profession, for our clients and our own teams. The competition certainly keeps us on our toes.

What can you tell other financial planners out there to encourage them to enter the FPI Financial Planner of the Year competition?

The competition is a very intense and completely takes you out of your comfort zone.

The three rounds of the competition test you in very different ways, so you need to be on top of your game. It really makes you appreciate the importance of industry standards and why these are put in place to benefit your clients.

It is certainly one of the most rewarding things I have done in the 20 years I have been in the industry. To be tested against some the top financial planners in our industry, as well as some of the top minds, and then to come out as one of the top three in the country two years in a row is something no one can ever take away from me.

It’s a great feeling to know that the years of hard work have all been worth it. From a client perspective, it gives them comfort knowing that they are dealing with one of the top financial planners in the country and the advice they are getting is the best advice for their unique individual circumstances. If

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you are passionate about what you do and you want to be the best in our profession, I would definitely encourage you to enter the competition. The reward to you personally as well as to your clients is immeasurable.

You are very involved with consumer initiatives. Tell us about some of the programmes you are involved in and why you are so passionate about it.

I am involved in financial wellness within our business. The primary focus is to provide financial planning advice, financial literacy and education to businesses in order to empower employees to make quality financial decisions that help them achieve their financial and lifestyle goals. I do this through group sessions as well as one-onone meetings.

My passion however is the youth. It is vitally important that we teach our kids the fundamental financial planning principles from an early age. This will hold them in great stead in the future and prevent the heavy burden on the economy.

Everyone is entitled to good advice. It’s a question of making it accessible to everyone.

What have been some of your proudest moments; personally and professionally?

From a professional point of view, I’m immensely proud of being one of the finalists in the FPI Financial Planner of the Year competition. Standing on the stage at the FPI Awards Ceremony with the honour of being recognised as one of the top three financial planners in the country, made all the hard work worth it.

From a personal point of view, it would have to be marrying my wife Noelene, and the birth of our two children, Abby and Luke. They have brought so much joy into our lives.

One serious or silly thing about yourself that people don’t know about you?

I have two. I have lived in Cape Town for 21 years but am still an avid Sharks supporter. I am also a bit of a golf nut but I don’t get to play as often as I would like to, so I have yet to test Gary Player’s assertion that the more you practice the luckier you get.

k r a M n o m y s c a M Mark ® Macsymon, CFP Wealth Manager, Private Client Holdings 2015 FPI Financial Planner of the Year Finalist

Mark, you were the youngest contestant in the FPI Financial Planner of the Year competition.

What were the highlights of the competition for you?

The third round of the competition was definitely the highlight for me because ironically, I tend to enjoy the most challenging aspects of any event the most.

During the panel interview, my financial planning knowledge was stress-tested by Sankie Morata, CFP ® (Chairperson of the

FPI Board), Peter Hewett, CFP ® (2014 FPI Financial Planner of the Year) David Thomson, CFP® (Chairperson of the FPI Disciplinary Committee) and Laura du Preez, CFP® (Editor of Personal Finance) – this was the experience that cast me out of my comfort zone.

The FPI Awards Ceremony Gala Dinner was of course another highlight of the competition but I have no doubt that Wouter Fourie, CFP® enjoyed the evening a touch more than Bruce Fleming, CFP® and I did!

Would you enter the competition again and why?

Without a doubt – the competition is incredibly beneficial because your financial planning process and practice management standards are scrutinised, and your business is stress-tested by the financial planning industry’s professional body. It is the ultimate stamp of approval and the credibility it creates is priceless.

In addition, it allows financial planning

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practitioners a golden opportunity to match their financial planning abilities against the best in the business. The feedback that you receive from FPI after every step of the competition is invaluable and the feedback can be used to fine tune various aspects of your business value proposition. The most important aspect is that the process will have a positive impact on your client’s financial wellbeing.

You have spent a lot of time studying; what motivated you to study a Postgraduate Diploma in Financial Planning and then an Advanced Postgraduate Diploma in Financial Planning after completing your Master of Commerce, Economics?

I am a competitive person by nature and consequently I have always wanted to be the best at whatever I choose to do. In order to be an excellent financial planner, I believe one requires a solid knowledge base and that is what drove me to study as far as I did. At the same time, in order to make active decisions about people’s livelihood and wellbeing, you need to have a high degree of conviction that what you are

advising someone to do is within their best interests. I do anticipate studying further in the future but what that will be I am not yet sure. Kids first…

Okay finish this sentence for me… “In the next five years I would like…”

To help build Private Client Holdings so that it is recognised as the Business Day’s Top Wealth Management Company in South Africa for high net worth families.

What advice would you give other young professionals who want to enter the competition?

Firstly, do not hesitate –FPI gives entrants constructive, thoughtful and critical feedback after each step of the competition. This is a great opportunity for any financial planner to strengthen their client value proposition, streamline business processes and procedures, fine tune customer relationship management (CRM) systems and force one to take a more critical stance about where one is positioned on the value chain for financial advice. Secondly, CFP® professionals are not policy pedlars so ensure that as a financial

planner, you do not represent an outfit where your performance is determined solely by quantity of sales.

Do not have a product-driven mind set with short-term motivations for personal gain.

CFP® professionals follow an advice-driven process where the use of a financial product may or may not be recommended to achieve the financial objectives of their clients. CFP® professionals have a genuine commitment to help clients achieve their financial objectives and they prescribe advice impartially, objectively and fairly.

That is the message that the community we serve needs to be familiar with. It must become conventional wisdom that if financial advice is sought, it is done with the expert help of a CERTIFIED FINANCIAL PLANNER® professional.

One serious or silly thing about yourself that people don’t know about you?

After I matriculated from Rondebosch Boys’ High School, I took a gap year, travelled to Australia, spent some time there and then went on to explore South East Asia. After the experience I gave some thought into leading a subsistence life in Indonesia!

I like to think that I’ve come a long way since then. On a more serious note, my fitness goal for 2016 is to run The Otter African Trail Run in under six hours. This trail is run annually along the legendary Otter Trail in the Garden Route.

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k r a M

a r i b m a d n a w M Gerald ® Mwandiambira, CFP Acting CEO, South African Savings Institute 2015 FPI Media Award Winner

Our Media Award winner! How does it feel having won this award in 2014 and again in 2015?

It was both an honour and a surprise to have received this award again for the second year running. It validated my efforts as my purpose has been to make sure that CERTIFIED FINANCIAL PLANNER® professionals and the public are able to engage through the media platforms available.

You are very passionate about financial literacy. We have seen this time and time again in the many media contributions you have made. How was this passion born?

For many years before choosing to become a financial planning professional, I fell into the category of being “financially illiterate”, but through the years I’ve been able to educate myself. Being financially literate

meant I was able to make better money decisions and I could see the benefits of it in my personal life.

This is where the passion was born; I wanted people to live better lives and that is why I advocate financial literacy. I enjoy seeing the positive change in people’s lives when they are able to actively manage their finances with the insight and knowledge they have gained.

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Being behind the camera is not something new for you. Tell us about the show you host on Business Day TV and how you use this platform to promote your CFP® designation.

I have been very fortunate to host two shows for Business Day TV. The Money Show is a consumer talk-show focused on consumer financial education. Consumers have the opportunity to discuss all financial with guests who are experts in their field. The second show I host is The Stokvel Show. This show targets stokvel and savings groups. Both shows are aired on Soweto TV as well, where their reach is over four million viewers.

As part of my contribution to our profession, I always try to use guests who have the CFP® designation. I trust that they are able to give consumers sound financial advice.

Whenever I submit my weekly money advice articles to DRUM magazine, who have a readership of three million, I always advise them to contact FPI to find an accredited financial planning professional.

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You are currently the acting CEO of South African Savings Institute (SASI); tell us about your role and how it has benefited your cause in educating South Africans about financial matters?

A professional comes to you for advice, wanting to know how they can make a difference using different media platforms to advocate a financially free South Africa. What would you tell them?

A core pillar of SASI is consumer education so this role has really tied in very well with my passion. The role has allowed me to be involved in the advocacy efforts of many stakeholders who hold the same core belief such as the National Credit Regulator (NCR), Financial Services Board (FSB), The Banking Association South Africa (BASA), National Treasury, FPI and many other corporates who promote financial education and a savings culture.

Being actively involved in media does not always produce an immediate return on investment, so I would advise them to engage with their audience because they are passionate about them and not because they believe it to be a glamorous feat for themselves. If their main objective is to emancipate individuals from financial slavery, and not specific product advice, then their efforts in using different media platforms to advocate a financially free South Africa will be successful.

Through our involvement with savings research we hope to make a significant contribution to increasing the financial knowledge and behavioural habits of all South Africans. I look forward to SASI making a meaningful impact in the consumer space.

One serious or silly thing about yourself that people don’t know about you?

Our profession demands that we be good listeners. I on the other hand love to talk, so I am often considered “loud”; but I am definitely learning to be a better listener.

Profiles

Profiles Being an FPI Approved Professional Practice™ makes your business stand out amongst your peers and sends a clear message to your clients that your practice adheres to the highest levels of standards and ethics.

In this issue we profile another two of FPI’s Approved Professional Practice™ firms who share their successes and why the FPI Approved Professional Practice™ accreditation is so important to them.

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The Wealth Corporation

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he Wealth Corporation as is it exists today represents the fulfilment of their founding vision; to pioneer an advice-based financial planning practice focused on the needs of individuals rather than the inappropriate distribution of financial products, and funded by a fully disclosed fee-based remuneration system as opposed to commission based remuneration. The practice has a proud history of being thought leaders in the industry, developing best practice in client service and advice processes and leading through example.

The Wealth Corporation’s advisory solution offers a complete view of the retirement planning and management process, looking at all aspects of financial and personal wellbeing. The practice calls this process Integrated Insight.

Integrated Insight The Wealth Corporation coaches its clients to be retirement ready by, helping them plan for and manage their retirement, empowering them to move into the retirement stage of their lives with optimism, and giving them a sense of security where they are able to maintain their financial independence. The Wealth Corporation’s world-class financial planning solutions move and grow with its clients as their circumstances change, and they take into consideration all aspects of what their future needs and challenges may be.

The practice’s financial planners and financial advisors assist clients to create a financial planning framework for their personal retirement readiness. In this way, The Wealth Corporation offers a complete view of the retirement planning and management process, looking at all aspects of financial and personal wellbeing.

Its service offering is ideally suited to those in the core wealth space, maximising the longevity of funds by creating the optimal asset allocation framework for an objectively appropriate risk tolerance level is key.

Advancing professional financial planning Given its proud history as advocators of reform, the practice’s affiliation with the Financial Planning Institute (FPI) is a natural next step in establishing the business as a leader in the industry.

Director of The Wealth Corporation, Peter Nieuwoudt, CFP®, previously served as chairperson of FPI and played a major role in the establishment of the financial planning profession in South Africa, including the affiliation with Financial Planning Standards Board Ltd. (FPSB), owner of the international CERTIFIED FINANCIAL PLANNER® certification programme outside the United States, and was instrumental in bringing the CERTIFIED FINANCIAL PLANNER® designation/CFP® designation to South Africa. He also spearheaded The Wealth Corporation’s accreditation as an FPI Approved Professional Practice™.

credibility. Approaching prospective clients and corporates with the FPI Approved Professional Practice™ accreditation behind the organisation ensures there is already a degree of integrity and authenticity which its financial planners and financial advisors would otherwise need to build from the bottom up.

About The Wealth Corporation The Wealth Corporation was founded in March 2001 following the merger of the financial planning practices of Durbanbased Scott Adkins, headed by Nigel Scott, and Cape-based Castle Street Financial Brokers, headed by Bouwer Nell. They joined the Citadel Group stable in 2012.

Its offices are based is Claremont, Durban, George, Port Elizabeth, Port Shepstone, Pretoria, Sandton, Tygervalley and Stellenbosch.

The practice’s advice process is based on the following three pillars; investment strategy, risk management and succession planning. These integrated insights are supported by the following pillars • Financial advice; • Practical advice; and • Emotional advice.

For more about The Wealth Corporation, visit www.thewealthcorporation.co.za

Being recognised as an FPI Approved Professional Practice™ is significant for the organisation as it provides The Wealth Corporation’s brand with a degree of

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Profiles

Quoin Wealth Why become an FPI Approved Professional Practice™?

Quoin Wealth helps to empower and educate entrepreneurs, executives, professionals and retirees to achieve their individual financial needs and goals. The practice’s CERTIFIED FINANCIAL PLANNER® professionals focus on establishing trusted long-term client relationships, while developing and reviewing uncomplicated but comprehensive, personalised financial plans. After Financial Planning Institute (FPI) introduced the concept of the FPI Approved Professional Practice™ brand with strict requirements, Quoin Wealth immediately saw the need to commit to the highest standards of professionalism and the advancement of the financial planning industry as a whole.

From a branding perspective this has allowed the practice to display its FPI Approved Professional Practice™ status at its office as well as website – which has certainly facilitated many discussions with clients about the financial planning industry, standards and the role of FPI. Having Quoin Wealth listed on FPI’s website as an FPI Approved Professional Practice™ allows their clients to access their business easily via a trusted industry body.

Adhering to high standards Quoin Wealth is very cognisant of the need for continued education and to improve the level of financial planners within their business and throughout the industry.

The practice strongly encourage the development of its staff and would like to provide a career path to all staff given their preferences and personal goals. It, therefore also encourages financial planners to write FPI’s CFP® Professional Competency Exams in order to obtain their CFP® designation.

Two of Quoin Wealth’s financial planners are actively involved with one or more of the

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FPI Approved Education Providers fulfilling various academic roles in respect of a range of financial planning qualifications. Being involved in the education side of the industry requires current technical knowledge which is, non-negotiable.

By providing free financial education sessions to groups on an adhoc basis and also providing free financial planning services to fund members of employee benefits, the practice believes that it has been able to add value to far more individuals than only its private clients.

The value of a fee-based business model Prior to the advent of the FAIS Act and many subsequent pieces of legislation and regulations aimed at client protection and client-focused planning practices, Quoin Wealth realised that using a fee-based model provided a sustainable practice, which ultimately serve the interest of its clients.

Firstly from a business perspective the fee model allows a sustainable, largely predictable income stream without the need or pressure to sell something to clients on an ongoing basis.

More importantly from a client perspective the model ensures that they review clients’ lifestyle plans. Quoin Wealth’s value lies in providing clients with a sound framework and keeping clients from making poor financial decisions which could prevent them from achieving their goals. The practice also believes that this can put clients in a better position to achieve their life goals.

Given the impending legislative changes a fee-based financial planning practice is already correctly positioned and Quoin Wealth expects the impact to be minimal and

certainly not impact what it fundamentally does and how it engages with clients.

The advice model and process Quoin Wealth believes that working with an integrated, goal-based approach to financial planning which allows the team to evaluate inter-related issues and develop alternate scenarios for clients - allowing clients to understand the impact of aspects such as inflation and high- and low-return environments on their long-term plan.

The financial planners apply a coaching model as they believe, very strongly, in financial education. Educating clients about key concepts and the role these play in a financial plan goes a long way to providing clients with a sense of control in respect of financial decision-making.

About Quoin Wealth Quoin Wealth (Pty) Ltd was established in 1995 and previously known as BDO Spencer Steward Financial Services (Cape) (Pty) Ltd, based in Cape Town. It offers a full range of solutions for its clients which include; financial planning, estate, tax, retirement, risk planning Company benefits, foreign exchange as well as wealth management.

Quoin Wealth is well positioned as a leading professional, fee-based and future-fit financial planning practice. As a member of the Acsis Strategic Partner community for more than 10 years, the practice applies a lifestyle financial planning approach to advice. The practice achieves this by consistently doing what it does well for its clients in building lasting relationships and continuing helping them to achieve their very personal life goals.

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Client Engagement

Change is inevitable is optional Change can be a good thing... just don’t make ME do it... said no one great ever!

By Wende Davids, Customer Experience Officer, Financial Planning Institute (FPI).

W

e are living in an age where the digital revolution has changed consumer behaviour and needs. It is no longer about the features and benefits of a product or the price consumers are willing to pay for it, but it’s about the experience they have with your business at every touch-point.

Consumers are more inclined to research your company before “jumping into bed” with you, and if the internet delivers a whole lot of negative comments about you, it could cost you sales.

Good, better, best In an industry where one product offers similar, if not the same benefits as another, there has to be something that sets your organisation apart. A product with bells and whistles won’t keep your customer loyal to your brand. Let’s do some introspection; do we really care about the customer experience? Most companies would respond to this by saying that they offer a superior customer experience, when in reality only one percent of them do.

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It’s not okay to just be “good enough”; you have to strive to be among the best. If you are not comparing yourself to the Zappos, and Ritz-Carlton’s of the world, then you need to go back to the drawing board. The general feel is that customer experience is purely fluffy stuff.

It will always be perceived as this until you have taken the time to define what customer experience is and what it means for your organisation. You need to make a deliberate decision to put a strategy in place that speaks to the entire customer journey.

Making the customer “feel good” during the acquisition stage will not keep them in your fold forever.

If you disappoint a customer, at any point in their journey with you, you will discover that they are willing to lose whatever they have invested in your business because they value the experience more than they value the product.

It’s time to gear up and embrace change

Offering a superior customer service brings customers back… again and again • Great customer service is an effective acquisition and retention strategy.

• Too much red-tape will cause customers high levels of dissatisfaction; some circumstances call for “company rules” to be broken. Trust your staff and give them enough mandate to offer superior service.

• Sometimes you have to get creative; customers are willing to give organisations a second chance if they make a great comeback after a bad experience.

• Word-of-mouth is still the best form of marketing and your reputation can be slashed in half by an unhappy customer.

The crap thing (and perhaps the good thing), is that social media allows that mouth with all its (dirty) words to reach oodles of people.

Food for thought

Customers are less accepting of bad service; their levels of tolerance have decreased over the years because they are not easily bought over with unsympathetic apologies.

If your business is losing customers or your growth is not what you expected it to be, sometimes, just sometimes it has nothing to do with your product offering and everything to do with the experience your customers are having with your brand.

If you haven’t already, it’s time to take consumers seriously; without them you are like a burnt out match.

Embrace the reality that change is the only constant! If you are not growing you are dying – grow with your customer.

To get ahead of the game you must be serious about the way you define, implement and manage your customer experience. You have to go with the customer flow.

“Your call is important to us; please enjoy the 15 minute KennyG solo while you wait.” – change the experience! #JustSaying

19

FPI News & Events

Revised FPI code of

Ethics comes into effect in early 2016

Message from Adv. Sankie Morata, CFPÂŽ, FPI Board Chairperson

We are pleased to announce our revised Code of Ethics and Practice Standards a truly world class code for financial planners and financial advisors in South Africa.

T

he code has been adopted by the Institute to provide principles and rules to those who are recognised and certified to use our certification marks, our local and international affiliates as well as all practicing financial planners in South Africa.

The code prescribes the ethical principles and rules of conduct that all FPI members will be expected to uphold and be measured against.

As a professional body that ultimately benefits the public, we take great interest in the professional conduct and integrity of our members and this document sets the benchmark for values, principles and standards that our members have to adhere to when dealing with the public.

20

We embarked on this process of reviewing our Code of Ethics and Professional Responsibility just under two years ago with a view to ensure that it not only serves the members better, but that it is also benchmarked against international best practice.

Since inception we have consulted various stakeholders extensively, including our members, consumers, regulators and policymakers, other professional bodies in South Africa and around the world, Financial Planning Standards Board (FPSB) and Ethics Institute of South Africa (EthicsSA).

This new code would not have been possible without the help of various professionals and institutions.

With this said, we would like to thank the following members of the FPI Practice Standards Working Group for their valued time, expertise and huge effort in putting together the first draft document: • • • • • •

Anton Swanepoel, CFP® David Kop, CFP® Adv. Jacqui Grové Lelané Bezuidenhout, CFP® Sherma Malan, CFP® Wouter Fourie, CFP®

A big thank you also goes to the following individuals who contributed to the initial stages of the above review: • • • • •

Gail Gibson, CFP® Gerhard Odendaal, CFP® Lee Rossini, CFP® Paul Rabenowitz, CFP® Rory O’Connor, CFP®

Also a special thanks to our sister professional bodies around the world for giving us insights into the workings of their respective Code of Ethics and for giving us permission to make extensive use of extracts from these documents. Some of the organisations include, but is not limited to, • The Financial Planning Association of Australia (FPA); and • The CFP Board of Standards of the United States of America.

The No. 1 financial planning reference for 2016, now available…

This new FPI Code of Ethics and Practice Standards will come into effect on Monday, 1 February 2016.

We strongly urge all members and employers of financial planning professionals to familiarise yourself with the new code as it will assist, guide and direct you with ethics discussions, choices, decisions as well as professional conduct.

To access the new code, visit www.fpi.co.za or get in touch with our membership team on membership@fpi.co.za or on (011) 470 6000 for more information or any queries.

21

FPI News & Events

FPI welcomes

New Members In line with FPI’s mission to benefit the public, the Institute publishes the names of new professional members. As per clause 2 of the FPI Member Regulations, the new members (period from 1 January - 31 October 2015) have fully complied with the certification requirements and have since been awarded the professional membership.

The Institute welcomes the following new members (listed alphabetical by surname, per region) to the financial planning profession:

Eastern Cape Name Hendrik Jurgens Botha Xolile Tiaan Wesley Jessica Christiaan Forgive Teyedzani André Bryce

Surname Dippenaar Engelbrecht Gubuza Herselman Maguire Price Ras Sibanda Smit Wild

Gauteng Region Designation CFP® FSATM RFPTM CFP® CFP® CFP® CFP® CFP® CFP® CFP®

Central Region Name Candice Magdelena Johan Louw Cornelius Hendrik Kenfil Maryke Andre Daniel Dionysia Anel Nadine Louise Chris

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Surname Bolt Cavaleiro Cronje Du Toit Grobbelaar Le Grange Marais Mocke Nel Retsinas Strampe Van den Berg Voges

Designation CFP® RFPTM CFP® CFP® CFP® CFP® CFP® CFP® FSATM CFP® CFP® FSATM FSATM

Name Kim Lee Anne Laura Jacob Estee Christiaan Shane Devin Johannes Adriaan Pieter Monique Celeste Johannes Magiel Van Reenen Marius Rogerio Da Silva Simone Yvonne Chamly Matthew Jacobus Kevin Robyn Sergio Kristin-Ann Amanda Michelle Onalenna Costantinous Christiaan Wynand Khanya

Surname Arendse Ball Becker Beetge Bekker Berkowitz Binedell Botha Botha Bräsler Bresler Burger Cabanita Cahi Chapman Cilliers Cloete Craig Correia Cronje De Graaff Dirkse Disipi Drepaniotis Du Preez Dunywa

Designation RFPTM CFP® CFP® CFP® CFP® CFP® CFP® CFP® FSATM CFP® CFP® RFPTM CFP® FSATM CFP® CFP® CFP® CFP® CFP® CFP® CFP® CFP® CFP® CFP® CFP® FSATM

Gauteng Region continue…

Name Andrew Anne Jan Harm Desiré Maryke Christoffel Frederik Galit Ugeshvari Howard Andrea Nelandhree Shaun Harwood Kirsty Tim Vaughan Trevor Robyn Trent Peter Willem Andrew James Eugene William Sumanth Sherma Dayne Semoli Didintle Wayne Ian Dean Snowy Duane Cedric Niemann Sumendren Thokozani David Hilton Diane Koobeshnie Veekash Ian Mackie Esti Andrew Mohlamare Bernard Zethu Amanda Shreekanth Ashona Lucas Anna Maria Aletta Nhlanhla Justice Angelo Terence Ashley Nicolaas Pierre Stephanie Silvia

Surname Edwards Ekstein Eloff Engelbrecht Engelbrecht Ferguson Fluxman Francis Freese Gavan Govender Gravett Greyling Harraway Harries Harris Hodges Hodges Holm Janse Van Rensburg Jones Joubert Maharaj Malan McLaughlin Mokhanoi Mokonoto Mossop Muller Musundwa Nicholls Melanie Naidoo Nkosi Pike Potter Raghubir Ramowthar Reid Rheinicke Sayers Sebopa Shongwe Sing Singh Slabber Smuts Thanjekwayo Theofanous Tobin Van Der Walt Van Zijl Venter Vorster

Designation CFP® RFPTM FSATM CFP® FSATM CFP® CFP® RFPTM CFP® RFPTM FSATM CFP® FSATM CFP® CFP® CFP® CFP® CFP® CFP® CFP® CFP® CFP® CFP® CFP® FSATM CFP® CFP® CFP® CFP® CFP® CFP® RFPTM FSATM CFP® CFP® RFPTM CFP® CFP® RFPTM FSATM CFP® CFP® CFP® CFP® CFP® FSATM CFP® RFPTM FSATM RFPTM CFP® CFP® CFP® FSATM

The South African Financial Planning Handbook 2016

2016 Edition at 2015 price

R1,197

Widely regarded as the number one reference work for all financial planners, legal advisers, compliance officers and academics. The South African Financial Planning Handbook is also a prescribed textbook for post-graduate studies.

Annually updated and available in print, ebook or online format to suit your preference.

Order your copy now!

23

FPI News & Events

KwaZulu-Natal Region Name Aroonkumar Louwrens Jason Gilbert Tom Tyron James Daphne Jane Kim David Michael Cyan Jean David Serina Gonasegarin Lugendran Paul Jarred Belinda Damian Vuyo Roxan Justin Roxanne Yogandran Peresha Devendree Saras Shannon Melanie Olisha Catherine Louise Tarayn Gwynnaeth Coreli Neville Julian Michael

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Surname Algoo Badenhorst Biddulph Bloy Brown Byers Lewis Caine Clarke Garrioch Girdherlal Govender Govindasamy Hellberg Houston Jacobs Johnson Khumalo Kriel Meanwell Mingard Moodley Naicker Naidoo Pakkiri Paul Piek Pillay Robberts Schalkwyk Schloms Thambiran Tharmiha Widlake

North Region Designation FSATM CFP® CFP® RFPTM CFP® CFP® CFP® CFP® CFP® CFP® CFP® CFP® CFP® CFP® CFP® CFP® CFP® CFP® RFPTM CFP® CFP® RFPTM FSATM CFP® CFP® CFP® CFP® CFP® CFP® CFP® FSATM CFP® RFPTM CFP®

Name Andre Johannes Petrus Michael Chrisna Elmarie Ilze Nelda Stephanus Sebastianus Adriaan Jan-Harm Carl Reinhardt Dirk Suzanne Cecile Andreas Chantel Eunice Lizelle Stephanus Abraham Mark Janneke Andre William Godfrey Gerhard Johannes Petrus Cornise Jacobus Cornelis Johannes Dean Erick George Jo-Anne Vaughan

Surname Boshoff Botha Brecht Brits Crous De Beer De Jager de Witt Dreyer Eloff Essafrau Fourie Geldenhuys Guthrie Howard Jansen van Vuuren Kok Kruger le Roux Mountjoy Munnik Prinsloo Schickerling Smith Strauss van Schalkwyk Van Schalkwyk Vickery Vischer Waite Wandrag

Designation CFP® CFP® CFP® RFPTM FSATM CFP® CFP® CFP® FSATM FSATM CFP® RFPTM CFP® CFP® FSATM CFP® CFP® CFP® CFP® CFP® CFP® FSATM CFP® CFP® CFP® CFP® CFP® CFP® FSATM CFP® CFP®

Western Cape Region Name Zaandre Sharne Claurita Genee Johann Hendrik Christoffel Christiaan Jaco Andrea Robert Edward Tyrone Jurie Francois Anika Eugene Lois Joan Lee-Ann Siebert Dormehl Suzanne Fadlah Johann Madri Roux Umulinga Stephen Theunis Nicolaas David Jonathan William Nicholas Kendall Jade Marchelle Mariaan Donlyn Richus

Surname Agenbag Andrade Baard Bennett Biermann Botha Brand Brits Buhr Byrne Coetzee De Kock Delicio De Witt Du Plessis Ernstzen Grobbelaar Hechter Hendricks Heyns Jacobs Joubert Karangwa Lishman Kotze Loubser Maingard Marra Mathews McKay Moelich Mulder Nel

Western Cape Region continues Designation CFP® CFP® CFP® CFP® FSATM CFP® CFP® CFP® FSATM CFP® CFP® CFP® CFP® CFP® CFP® CFP® CFP® CFP® CFP® CFP® CFP® CFP® FSATM CFP® CFP® CFP® CFP® FSATM CFP® CFP® CFP® CFP® CFP®

Name Danielle Ryno Nina Kim Candice Adele Anthony John Jason Lauren Tania Barbara Annik Jason Andrew Willem Hendrik Mia André Catherine Pierre Edward Jennifer Wouter Johan Williams Regardt Suné Michelle Ben Jacques Kirsty Marlon Marc Alan Kim Justin André

Surname O’Kennedy Oosthuizen Olivier Overton Paine Plaatjies Priday Ribeiro Rodseth Rossouw Smith Stevens Strauss Street Strydom Suckling Taljaard Theron Turner Van der Bijl Van Huyssteen Van Huyssteen Van Schalkwyk Van Wyk Vermeulen Visser Wade Walters Watson Wellburn Welsh Wendover Wethmar

Designation CFP® CFP® RFPTM CFP® CFP® CFP® CFP® CFP® FSATM CFP® CFP® CFP® CFP® CFP® CFP® FSATM CFP® CFP® FSATM CFP® CFP® CFP® CFP® CFP® CFP® FSATM CFP® CFP® CFP® CFP® CFP® CFP® CFP®

25

FPI News & Events

Gerhardt Meyer, CFP

®

Appointed by Financial Planning Standards Board as Board Director

States, to appoint Adv. Gerhardt Meyer, CFP®, as a Board Director for a four year term, effective from April 2016 has been welcomed by the Financial Planning Institute of Southern Africa (FPI).

Godfrey Nti, FPI CEO said that Gerhardt’s appointment to FPSB’s Board is yet another proud achievement for the Institute, and South Africa as a whole - on the global stage.

He added that as a former chairperson of the FPI Board, as well as the current chairperson of the FPI Advocacy Committee, Gerhardt’s strong leadership in these capacities has been instrumental in developing FPI to be the respected professional body that it has become.

T

he recent announcement made

by Financial Planning Standards Board Ltd. (FPSB), owner of the international CERTIFIED FINANCIAL PLANNER® programme outside the United

His intimate involvement in establishing and nurturing FPI’s strategic relationships with the industry policymakers and regulators, as well as advocacy work on the value of financial planning and how it should best be regulated, has produced some tangible results.

The role of FPSB’s Board involves: • Developing governing policies on behalf of the membership that address the broadest levels of all organisational decisions and situations; • Identifying membership needs and developing and/or overseeing policies to address those needs, and • Advocating on behalf of the membership.

Noel Maye, FPSB CEO, added that he looks forward to adding Gerhardt’s skillset to a talented and globally diverse 2016 FPSB Board of Directors.

As well as his strong contribution to its Board Strategy discussions on growing the CFP® certification globally, particularly in developing markets, and gaining increased recognition from regulators and legislators for the financial planning profession and CFP® certification.

About Adv. Gerhardt Meyer, CFP® Adv. Meyer, former chairperson of the FPI Board, currently chairs the FPI Advocacy Committee, an FPI Board-Sub Committee, and FPSB’s Regulations Advisory Panel.

He is also a non-executive director of the FPI Board. Adv. Meyer holds a BCom (Law) Degree and a LLB Degree from the University of Stellenbosch. He is a CERTIFIED FINANCIAL PLANNER® professional and an Advocate of the High Court of South Africa.

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Adv. Meyer currently heads up the Legal department at Old Mutual’s Personal Finance division.

“I have over the past 10 years been privileged to have been involved in numerous volunteer positions in financial services which I have really enjoyed.

I am particularly proud to have had a long standing association with FPI, the founding Member and affiliate of FPSB in South Africa.

Having previously been the South African representative to FPSB’s Council and current chairperson of its Regulations Advisory Panel, my appointment to FPSB’s Board provides me with an ideal opportunity to continue working for the advancement of the financial planning profession. To a degree, it feels like a natural progression in my ’volunteer career’. I am very excited about this opportunity and look forward to joining FPSB’s Board in April 2016 and to contribute to the ongoing evolution of financial planning across the global community”.

YOU ADHERE TO THE

HIGHEST STANDARDS,

YOU PUT YOUR CLIENTS

INTERESTS FIRST

YOU ARE AN ACCOmPLISHED CFP速

PROFESSIONAL

LET PEOPLE

KNOW

FPI News & Events

FPI sponsors 20th

KZN Grade 11

Speech Contest on Finance

We were once again privileged to have sponsored and to have been associated, with the KwaZulu-Natal Grade 11 Speech Contest on Finance.

T

he competition took place at the Port Shepstone Civic Centre which was abuzz with activities on Friday, 23 October 2015, with many excited learners and their guardians rushing around.

The competition was designed to encourage careers in finance and in financial planning as well as entrepreneurship in particular. We witnessed how many learners from across KwaZulu-Natal (KZN) and the uMgungundlovu District Municipality gathered for the 2015 “Talk Money Speech Contest” organised by the KwaZulu-Natal Financial Literacy Association (KZNFLA).

This is yet another opportunity for us to create awareness about financial planning, the value of proper financial planning, the benefits of using a CERTIFIED FINANCIAL PLANNER® professional

and to create awareness about a career in financial planning. It is also a way of promoting financial literacy at a young age. The event started with the Ugu District Financial Practitioners Development Trust addressing the general lack of knowledge about financial planning services among learners and to highlight the importance of financial education at school level.

The history of the competition This year the KwaZulu-Natal Grade 11 Speech Contest also celebrated its twentieth anniversary. The Financial Practitioners Development Trust started in 1995 and was later joined by the KwaZulu-Natal Financial Literacy Association at which nine finalists competed in the final round of the competition.

From left to right: Riana Badenhorst (FPI Consumer Affairs Co-ordinator), Matthew van der Meer (winner from Glenwood High School) and Godfrey Nti (FPI CEO)

28

The speech contest has gone from strength to strength and was extended to all Grade 11 learners at over 1 500 public high schools in all 12 districts of KZN. “Over the last six years, attending this competition has easily been the most heart-warming event in my diary.

Watching the tender faces of the contestants and seeing that it means everything to them, listening to them present their speeches and realising how much research and practice they have put in, watching their teachers sweating as they pace the hallways and then also the constant buzz and excitement that is generated by the audience, largely made up of the peers of the contestants from the different schools across the province.

The competition certainly lived up to my expectations, with a noticeable exception, being the dramatic increase in the quality of the presentations”, said Godfrey Nti, FPI CEO.

The winner Matthew van der Meer, Grade 11 learner from Glenwood High School, was declared the winner of this year’s KZN Talk Money Speech Contest. His speech “I want to make my own money, my own way” landed him the prize, which we sponsored.

The prize consists of a bursary to study a financial planning undergraduate and postgraduate qualifications at one of the FPI

Approved Education Providers as well as a tablet loaded with a copy of the Financial Planner Handbook. In addition to the bursary and tablet, the prize also includes a visit to a university of his choice (one of the FPI Approved Education Providers), a visit to the FPI offices in Johannesburg, as well as the Johannesburg Stock Exchange (JSE), the Financial Services Board (FSB), a media house and an FPI Approved Professional Practice™.

This will certainly give Matthew a good view of what to expect in the world of financial planning.

Previous winners who are currently benefiting from having won this competition and studying an FPI sponsored financial planning qualification, are Mondli Ngwenya (University of Johannesburg) and Bongumusa Nkwanyana (University of the Free State).

Lyndwill Clarke, Chief Adjudicator for the competition and Head of Department: Consumer Education at FSB said; “The standard has been increasing dramatically over the past five years and we are very impressed with the quality of work by the learners, their teachers and subject advisors.

“FSB will host the competition in Gauteng in 2016, through the Financial Services Consumer Education Foundation and in collaboration with the Gauteng Department of Education.

The Gauteng competition will be based on the model established by the KZNFLA.”

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FPI News & Events

Why become an

FPI Approved ™ Professional Practice B

eing an FPI Approved Professional Practice™ makes you stand out amongst your peers and sends a clear message to your clients that your practice adheres to the highest levels of standards and ethics.

It also validates that your practice is following the six-step financial process and that you place the needs and objectives of your clients at the heart of your business.

The professional statuses of our members are elevated on many levels; not only do they stand out in a group of financial advisors who do not carry the designation, but they can confidently deliver their services with the highest standards of knowledge, expertise and ethical conduct.

10 reasons to become an FPI Approved Professional Practice™

1

By displaying the FPI Approved Professional PracticeTM brand, your business will be recognised as a professional financial planning practice offering financial services of the highest standard.

2

You’ll get higher community recognition among your peers and consumers by actively promoting and using FPI Approved Professional PracticeTM branding in your business.

3

You will have increased exposure through advertising and article opportunities on various FPI platforms, many times at no cost to your practice.

4

Your practice will be listed on the FPI website as an FPI Approved Professional PracticeTM, giving you more than R50 000 worth of free advertising.

5

You will benefit from participating in FPI consumer awareness campaigns that will create a demand for your practice and the professionals employed by you.

6

You will become an employer of choice; your commitment to the highest standards will help you attract the industry’s top talent.

You can advertise for potential employees through FPI on various platforms, at a reduced rate.

7

You and your staff can network in professional forums, creating the opportunity to showcase your practice to other like-minded professionals.

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8

By upholding the rigorous standards of this brand, you will play a pivotal role in transforming the standards of financial planning in South Africa.

9

Your practice will be an FPI Mentorship Centre by mentoring new financial planning employers and students. Your practice will receive free mentorship training to enable you to incorporate the FPI Mentorship programme into your supervision practices.

10

By partnering with us through co-branding initiatives, we will promote your business to your clients, confirming your professional practice status and approval.

If you would like to apply to be an FPI Approved Professional Practice™, please contact: • Patrick De Nation on (011) 470 – 6101 or patrick@fpi.co.za • Justin Lippiatt on (011) 470 – 6076 or justin@fpi.co.za

FPI News & Events

#WhichOneAreYou

The #WhichOneAreYou competition was the driving force behind the success of the annual Financial Planning Week (#FPW2015) which was held on 7-11 September 2015.

32

I

ndividuals who entered the competition, and won a year’s free financial planning advice and support from a CERTIFIED FINANCIAL PLANNER® professional, submitted a written submission of no more than 140 words or a 60 second video telling us about their financial behaviours and challenges.

The aim of this annual initiative is to create awareness around financial planning and the importance of using a CERTIFIED FINANCIAL PLANNER® professional. Together with a host of CERTIFIED FINANCIAL PLANNER® professionals a range of free financial planning educational events, such as the FPI MYMONEY123™ financial literacy sessions as well as free financial planning consultations and workshops were offered throughout the country as part of #FPW2015 campaign.

The campaign once again proved that not many South Africans have access to a professional financial planner. They lacked the guidance a financial planner would give to allow them to reach their financial goals or to understand the value of financial planning. This finding will be a key focus during #FPW2016. We will outline the challenges and successes that each participant has been through during their financial journeys. We will reiterate the possibility for every South African to become more financially stable and savvy with the support and guidance of a CFP® professional.

We asked a few of our CERTIFIED FINANCIAL PLANNER® professionals and #FPW2015 participating practices what they took away from the campaign. This is what they had to say: “We believe that the work being done and covered during FPI’s Financial Planning Week is very important in educating those who otherwise cannot afford nor have financial advice easily accessible to them. Therefore, during Financial Planning Week we did extensive marketing to promote the event and increase the number of people attending our free financial planning workshops and consultations.

We also provided a platform for attendees to learn from professionals who are genuinely out to empower them” said Nicola Chiringa from Veritas Wealth Management.

Kobus Kleyn, CFP® professional and the FPI "It Starts with Me" 2015 winner said “I was honoured to be able to host workshops and offer free-one-on-one financial planning consultation at the Financial Services Board (FSB).

It was an incredible experience and there were goose bump moments that will stay with me for a long time. FPI’s aim in creating this consumer initiative was really amazing. I believe that it will grow over the years and I look forward to continue taking part in this initiative and further help in creating awareness around the importance of financial planning”

It was clear that consumers were indebted and during the consultation they were given tips to address the following questions: • What is the best and quickest way to get out of debt?

• The difference between good and bad debt?

• How much to save for retirement and most effective way to save for it?

• How to find and choose a professional financial planner; and • What to look out for to avoid ‘bad’ advice?

“Our aim is help people break the cycle of financial dependency through financial awareness programmes, education, and coaching.

It is possible for every South African to thrive, regardless of how much they earn, and our CFP® professionals are ideally suited to show them just how this can be done. An extended token of appreciation goes to our members, financial planning practices and corporates, as well as our affiliates who participated during Financial Planning Week.

This was an important week for FPI and CFP® professionals as it allowed members of the public to experience first-hand the value an accredited financial planner can add. The work done by FPI volunteers in this week does help in creating a more educated and financially aware South Africa, which will ultimately lead to a better life for all” said David Kop, CFP®, HOD: Advocacy and Consumer Affairs at FPI.

thank you to the following practices and CfP® professionals for making this event a success:

• • • • • • • • • • • •

Veritas Wealth Management Consolidated Financial Planning Core Wealth Managers Crue Invest Efficient Advise Fiscal Private Clients Jeanine Player, CFP® at Private Wealth Management Netto Invest Paul Rossouw, CFP® at Old Mutual PFA Sanlam Financial Advisors Wealthup Wendy Foley, CFP®

as part of their financial Planning week initiative, the following financial practices and CertIfIed fInanCIaL PLanner® professionals offered free financial planning sessions to the financial services Board (fsB) staff:

• • • •

Ascor™ Independent Wealth Managers brenthurst Wealth Solutions Efficient Advise Kobus Kleyn, CFP®

33

FPI News & Events

Continuous Professional Face-to-face events

Estate Planning

February FPI and SAIT Budget Breakfast

8 February 9 February 10 February 15 February 16 February 17 February

Johannesburg and streamed live to other cities (Date to be confirmed)

Estate Planning

Johannesburg Pretoria Johannesburg

2 March 3 March 4 March

Essential Tax Update

Pretoria Johannesburg Johannesburg Cape Town Bloemfontein Durban Port Elizabeth

11 12 13 14 18 19 20

April April April April April April April

May

Professionalism, Practice Standards and Practice Management

Pretoria Johannesburg Cape Town George Bloemfontein Durban Port Elizabeth

16 17 18 19 23 24 25

May May May May May May May

June

FPI Professionals Convention

Johannesburg

14-15 June

July

Risk Management

Bloemfontein Durban Port Elizabeth Cape Town Pretoria Johannesburg

19 20 21 25 26 27

September

Retirement and Investment Planning (2 day workshop)

Johannesburg Durban Cape Town

19 - 20 September 21 - 22 September 26 - 27 September

March

April

34

Cape Town Cape Town George Bloemfontein Durban Port Elizabeth

July July July July July July

Development Events 2016 Face-to-face events

October - November

Annual Refresher Workshop

Durban East London Port Elizabeth Bloemfontein Polokwane Pretoria Johannesburg Johannesburg Nelspruit George Cape Town Cape Town

26 October 27 October 28 October 2 November 7 November 8 November 9 November 10 November 11 November 16 November 17 November 18 November

Webinars and online courses 25 February

16h00-17h00

February

Ethics

Webinar

Integrated Financial Planning (The Financial Plan)

Online course

17 March

16h00-17h00

Tax Update

Webinar

21 April

16h00-17h00

Practice Standards

Webinar

Capital Gains Tax

Online course

Health Benefits

Webinar

Tax Planning: Estate Duty

Online course

April 26 May

16h00-17h00

June 28 July

16h00-17h00

Employee Benefits

Webinar

11 August

16h00-17h00

Communication

Webinar

25 August

16h00-17h00

Investment Planning Risk Profiling

Webinar

Risk Management- Planning with Business Assurance

Online course

16h00-17h00

Personal Risk and Insurance

Webinar

29 September 16h00-17h00

Financial Planning and Trusts

Webinar

Retirement Planning

Online course

August 8 September

October

Discounts on new subscription offering If you recertify by 31 December 2015, you will also receive more than 50% discount for the online content subscription earning you CPD points.

The subscription gives you access to six 2-hour online content such as; video tutorials, online articles and research.

Every second month you will receive 2-hours’ worth of content covering: • Best Practice and Professionalism • Compliance • Ethics • Estate Planning • Investment Planning • Retirement Planning

The 2016 fee for the online content is R2 100.00 and if you subscribe before the end of 2015 you will only pay R1 140.00 (including VAT).

To find out more about the 2016 events, contact the events team on (011) 470-6000 or email events@fpi.co.za.

** Dates are subject to change depending on speaker and venue availability

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Healthcare

Low cost medical scheme

Benefit Options G

overnment wishes to extend risk pooling through health insurance to all those who can afford to participate in such arrangements via the mechanism of social health insurance.

The report of the Consultative Investigation into Low Income Medical Schemes (LIMS report, 2006) provided clear recommendations for modifications to the Medical Schemes Act that would enable the establishment of a new class of medical scheme (“LIMS schemes”). Unfortunately nothing was implemented at the time and by 2015 further consultations was still being conducted.

By Gail Gibson, CFP® and Lucas Greyling, CFP®, FPI Health Competency Committee Members

CMS Circular 9 of 2015, which was released in February 2015, set out guidelines for a low cost medical scheme benefit option for public comment and final guidelines for such a benefit option is expected to be released very soon. This has prompted FPI to highlight the need for such an option as well as the benefits that this may hold for Financial Planners.

The need for a low cost medical scheme benefit option Health insurance is increasingly viewed as an instrument of economic growth (Bloom, 2011) since labour is the main asset poor people have to generate income which is seriously impaired by ill health. Health shocks therefore have especially negative effects on household welfare (Gertler and Gruber, 2002) and studies in villages in Kenya, Uganda, Peru and India over a four year period and covering 25 000 households found overwhelming evidence that health shocks are the most frequent cause of long-term poverty (Krishna, 2007).

Evidence from many health systems have shown that prepayment through insurance schemes leads to greater fairness in healthcare financing (World Health Report, 2010) and a study of 77 economies for the period 1994-2005 (Han et al, 2010) concluded that that insurance development is positively correlated with economic growth.

This is why Section 27 of the Constitution obliges the state to develop legislation to progressively realise the right of access to healthcare and the ANC’s National Health Plan included the objective of increasing efficiency of healthcare financing and to promote greater control by communities and individuals over all aspects of their lives.

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The Consultative Investigation into Low Income Medical Schemes (LIMS report, 2006) household survey found that some 72% of respondents in the low-income group (earning less than R2 500 a month) and 82% of respondents in the higherincome group (earning between R2 500 and R6 000 a month) agreed or strongly agreed with the statement: “I would be willing to pay a small amount each month for free medical care even if I am not sick now.” In 2014 it was estimated that an affordable medical scheme in South Africa should have a contribution rate of between R280 to R380 per month. However, according the CMS (Annual Report 2013/14) the average monthly contribution for a principal member in 2014 came to

R1200

R280 - R380

R1000 R800

R1152

(2014 estimates)

R1029 R882

R712

R718

R600

R758

R675

R715

R650

R655 R540

R400 R200

Resolution

Liberty

Bestmed

Fedhealth

Medshield

Medihelp

Momentum

R0 Sizwe Medical Fund

It is also estimated that the informal economy (e.g. informal traders, waste collectors, home-based care workers, taxi drivers etc.) generates around 28% of South Africa’s gross domestic product (GDP), which is 2.5 times the size of the contribution by the entire agricultural sector, or 70% of the contribution by the mining sector.

Lowest monthly principal member contributor Estimated affordable monthly LIMS cost

Bonitas

CK Prahalad, in his book, “The Fortune at the Bottom of the Pyramid - Eradicating poverty through profits”, states that the world's most exciting, fastest-growing new market is at the bottom of the pyramid.

Collectively, the world's billions of lowincome families have immense untapped buying power and represent an enormous opportunity for those who learn how to serve them.

mobile devices (Sigma 2/2014). Therefore Planners who are prepared to become part of the digital world stand to benefit from the large numbers of potential customers that are crying out for an affordable way to cover their medical risks.

Diagram 1 shows how the targeted “affordable” contribution rate compares with the most affordable scheme options of medical schemes.

Discovery

How financial planners can benefit from a low cost benefit option

R1 825. This is simply out of reach for the average household.

Gems

However, according to the latest available annual report of the CMS (2013/14) there were 87 registered medical schemes at the end of December 2013, of which 24 were open and 63 restricted. These schemes had a total of 8 776 279 beneficiaries, comprising 3 878 267 principal members and 4 898 012 dependants. South Africa had a population of 52 982 000 in 2013 (Stats SA, 2013). This means that in 2013 more than 44.2 million people in South Africa still did not participate in medical schemes.

For Discovery, Bonitas, Momentum used second lowest for comparability Diagram 1 Source: Insight Medicine Information Discouraged by the inability of governments to reach rural populations and people engaged in the informal sector, communities have increasingly been mobilising themselves to secure protection against financial shocks. South Africa therefore has an extensive non-governmental sector with more than 100 000 registered non-profit organisations. Many of these are trade associations and other representative bodies representing the informal sector. These nonprofit member organisations are likely to be good touch-points for introducing a low cost benefit option.

Digital technology is making it possible to reach these communities in more effective ways at an affordable price point. Almost the complete value chain of distribution and customer service can now be performed online and through

Conclusion In all likelihood, new technology will eventually enable customers to arrange almost all of their insurance needs through remote digital channels. Research shows that globally low-income communities list unplanned medical expenses as their biggest concern. Satisfying this demand for medical cover will most likely be very lucrative for those intermediaries who find ways to extend their reach into this mass market though digital technology.

Importantly, digital transformation does not spell the end of intermediaries but rather a fantastic opportunity for growth. Customers will continue to value personal interaction and expert advice of agents and brokers.

The challenge for intermediaries is therefore to adapt their business models to meet the varying needs and preferences of millions of customers in the current mass market not being served.

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Healthcare

Highly-regulated broker environment:

A challenge or South Africa has followed in the footsteps of most first world countries and implemented certain legal frameworks for business conduct. South African healthcare brokers operate in a highly-regulated environment, which poses a challenge for intermediaries.

They are guided by the Medical Schemes Act of 1998 and the Financial Services Board (FSB) regulations.

By Chris Luyt, Head of Marketing and Distribution, Bestmed

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South Africa’s medical industry cannot function without healthcare brokers. Clients see them as impartial and tend to listen more to what they have to say to them. They believe that they act in their best interests and will in turn provide them with solutions that best suit them, without punting a specific scheme or its products. They are well equipped to provide the best advice on benefit options.

an opportunity?

The Medical Schemes Act of 1998 states that any person who wants to be accredited as a healthcare broker must apply in writing to the council. The application must be submitted with a recognised educational qualification and appropriate experience, among other documentation.

This legislation sometimes overwhelms brokers with detailed administrative functions and expensive compliance, which contributes to a number of well-qualified intermediaries leaving the industry.

The Minister of Health’s regulation of the R69.00 plus VAT as an amount payable by medical schemes to brokers with effect from 1 May 2012 has also created challenges for the broker environment. This current remuneration is viewed as insufficient considering the work that the intermediaries undertake. The only way they can make money is when they have large client volumes and this can only happen over a long period of time.

In order to ensure that brokers perform optimally and meet the challenges in the industry, it is compulsory for medical schemes to ensure that brokers receive necessary training and understand the schemes’ offerings. Ongoing consultation and training are a necessity as brokers tend to

migrate to schemes that they can work with collaboratively, while also providing them with opportunities to make their work processes simpler and more efficient.

Key to a good brokerage is the weight behind a brand, financial stability, good corporate governance and growth. Brokers usually select a couple of schemes to represent, and they ensure that they understand these scheme different approaches and languages in order to sell their products. It’s all about alignment.

The broker industry is also categorised to provide different solutions for different needs.

Solid relationships, accessibility and training are the key aspects of assisting healthcare brokers to deal with the challenges they face.

The 3% statutory commission in the opinion of many is insufficient.

It becomes important to ensure that the workload is lightened by giving healthcare brokers solutions that will leave them well equipped to provide a service to the scheme’s members. Lastly, as an important part of the industry, healthcare brokers need to be recognised for the contribution they bring to the industry and the economy of this country.

Healthcare brokers, when acknowledged and afforded the right tools, will stay in their field and continue to provide an efficient service.

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Industry news & events

Boston calling

Feedback from the FPA Annual Conference A whitewash game for the Boston Red Sox against the Baltimore Orioles, on the eve of the 2015 Financial Planning Association (FPA) Conference, set the scene for four exciting days in Boston at the world’s largest gathering of CFP® professionals.

T

By Wouter Fourie, CFP®, 2015/16 FPI Financial Planner of the Year

he conference was held from 26 -28 September and it brought together over 2 000 financial planning professionals from the United States and countries as far afield as Russia, Japan, Australia, Canada, and of course South Africa. It consisted of six mass general sessions with leading global thinkers such as David Meerman Scott and the grey-haired futurist Dr Michio Kaku. We also had the choice of no less than 62 different breakout sessions, where delegates brainstormed trends, new practices and problems that appear to be universal across the 19 countries present.

Turbulence ahead From the first session on day one it was clear that many of the CFP® professionals felt as bruised and battered as Baltimore’s baseball team. Delegates could be seen checking their iPhones regularly and every coffee session had talk of the massive turbulence in global markets and the drop in stock value of many of the perceived blue chip stocks.

This topic was discussed at length in the various breakouts and in many of the general sessions, and the message is clear have a plan and stick to it.

Delegates took comfort in the fact that the turbulent market environment clearly affected every country present. At the same time, they discussed the value of a strong and clear long-term plan that was executed with conviction.

Long-term is getting longer

David Meerman Scott

Keynote Host - Jill Schlesinger, CFP®

With all the talk of a good long-term investment and wealth management plan came the realisation that people are getting older and their investments and savings have to look after them for much longer.

This so-called grey-tsunami has been prevalent for some time in countries such as Japan, but it is spreading to other developed markets and can also be felt in countries such as South Africa.

Dr Michio Kaku

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Ed Gjertsen III, CFP®, 2015 FPA President

Again, this new reality places emphasis on the importance of creating a strong longterm plan that considers the changes in mortality rates and that are robust enough to

age with the client. Longevity is a reality and advisors need to revisit their calculations and projections taking into account the fact that people are living longer.

Look after the fairer sex

and foremost with the husband, the CFP® professional should assist both partners in communicating and ensuring that their legacy is not scuppered due to a lack of communication or planning.

Marketing is getting personal again

It became evident from many formal and informal discussions at the FPA Annual Conference that we as professionals often neglect women in our planning and marketing activities. CFP® professionals have a responsibility towards women, both in helping them manage their wealth and legacy and, in more traditional households, to make sure that their needs are respected and met.

One of the most encouraging messages was on the importance and power of social media marketing. Speaking at one of the mass general sessions, David Meerman Scott encouraged CFP® professionals to use social channels such as Facebook to build a relationship with current and prospective customers.

The stories abound of women who supported their husband during his career, but are then left unsure about his investments, insurance policies and last will and testament when he passes. Although the responsibility lies first

By carefully curating their social feeds, CFP® professionals can build trust and credibility by sharing and commenting on industry news and insights. They can also strengthen their relationship with clients by responding

to enquiries and generally interacting with their online family.

Lastly, a well curated Facebook, LinkedIn or Twitter channel signals a confident and informed CFP® professional that can be trusted to provide personal advice.

The FPA Annual Conference was an inspiring and highly informative conference and worth a visit if you are ever given the opportunity or decide to attend. Next year the conference will be held at the Baltimore Convention Centre from 14 -16 September in Baltimore, Maryland. Let’s hope Baltimore can beat the Red Sox by then!

To read more about the 2015 FPA Annual Conference or to book a seat at the 2016 conference, visit www.fpa-be.org.

Are you a fiduciary professional?

Can you afford not to be a FISA member? Membership is open to anyone in the fiduciary field who meets our membership criteria, including financial planners, attorneys, and accountants. FISA members are subject to a Code of Ethics demanding the utmost integrity and diligence.

FISA also offers the professional designation FPSA®* indicating competency and professionalism in estate planning, wills, estates and trusts. To earn the FPSA® designation, you need to pass an exam and comply with educational, ethical, and experience requirements.

Find out more and join FISA at www.fidsa.org.za *Fiduciary Practitioner of South Africa®

ESTATE PLANNING | TRUSTS | WILLS | ESTATES | BENEFICIARY FUNDS

www.fidsa.org.za

Industry news & events

A National Qualifications

Framework at work

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he National Qualifications Framework (NQF) is a practical framework to serve the lifelong learner. Over the past 19 years, the South African Qualifications Authority (SAQA) has made remarkable progress in overseeing the development and implementation of the NQF. It has provided a solid foundation for workplaces and learning institutions to work towards ensuring that lifelong learning is accessible to all South Africans.

assessed against NQF level 8 descriptors through a portfolio of evidence and practical demonstration. Her application was successful and she was able to enrol. There are many other examples in South Africa where someone may have been practising skills such as plumbing, motor mechanics and other trades for many years without a formal qualification. The time may come when the individual may want to obtain a formal qualification in order to advance their career. Through RPL, the person’s skills can be assessed and may be allocated credits into studying towards a qualification or they may qualify for a full qualification on the relevant NQF level. RPL does not only apply

to trades. A learner with a diploma, relevant knowledge and experience, may after an RPL process, be admitted to an Honours or even a Masters Programme at an institution of higher learning. RPL therefore also serves as a tool to accelerate the redress of past unfair discrimination in education, training and employment opportunities, as in the past some people did not have access to education because of their race. People who have been previously discriminated against, who have the right skills and experience can now have access to qualifications without starting from scratch.

The National Policy for the Implementation of RPL that SAQA has developed recognises non-formal and informal learning in order to allow people into formal training and employment even though they do not have

Recognition of Prior Learning Take the case of Martha*. She was working at an organisation where she held a middlemanagement position for 12 years. At the time she only had a Bachelors Degree on NQF level 7. When there were opportunities for her to apply for senior positions in her organisation, she couldn’t apply because a Masters in Management was required.

The challenge was that she needed an NQF level 8 qualification (honours or postgraduate diploma) in order to enrol for a Masters Degree. Martha heard about Recognition of Prior Learning (RPL) and decided to apply for it so that she can be granted access into the Masters programme. The RPL process required her prior experience, knowledge and skills to be

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*Not her real name.

the necessary educational qualification. This means an individual’s collective experience in a field of study can be assessed and aligned to a formal NQF qualification at the relevant NQF level, be allocated credits towards entry into studying towards a particular qualification in formal training or given access to employment.

SAQA has also completed the development of all its policies that was required by the NQF Act and is now overseeing the policy implementation. The approach for this is results-driven as qualitative and quantitative targets have been established for the achievement of this objective. Further, an implementing agency; internal monitoring and evaluation mechanisms; as well as external monitoring and evaluation are in place. The latter will include feedback from stakeholders allowing the organisation to see the bigger picture and address any weaknesses in the system.

The process of developing and implementing the NQF is a continuing journey. The success of a country is founded on the ability of its citizens to learn and have access to economic opportunities.

SAQA will therefore continue to strive to improve the education and training system for the betterment of all South Africans

For information call 086 010 3188 or email saqainfo@saqa.org.za.

Under the NQF Act of 2008, the South African Qualifications Authority (SAQA) is mandated to oversee the further development and implementation of the National Qualifications Framework (NQF). The NQF records all learning achievements across the 10 NQF levels to ensure that the country’s qualification imperatives are met and that the country has credible qualifications that are nationally and internationally recognised as well as an education system that allows learners to move from one field of study to the next or from one NQF level to the other.

The NQF objectives are to: • To create a single integrated national framework for learning achievements; • To facilitate access to, and mobility and progression within education, training and career paths; • To enhance the quality of education and training;and • Accelerate the redress of past unfair discrimination in education, training and employment opportunities.

The objectives of the NQF are designed to contribute to the full personal development of each learner and the social economic development of the nation at large.

Investment

The Market

Turbulence Trap The National Association of Securities Dealers (NASDAQ represents the tech-heavy composite index of over 3000 global companies) coined the term “market turbulence trap” on 20 May 2015.

T

By Paul Nixon, CFP®, Head of Investment Product Enablement, Barclays Global Investments and Solutions: Africa

he meme spread rather quickly (as memes tend to do), being picked up by, amongst others, Morningstar and NBC in quick succession. Of particular interest is both the content and wild-fire manner in which it spread revealing and reinforcing investor obsession with market volatility. The media is naturally aware of the stir market wobbles cause, fanning the flames of investor discomfort. So what is this “market turbulence trap”, and from an investor psychology perspective, what is happening deep within the recesses of our limbic system, waiting to ensnare us?

The original article provides an amusing example of the intense media scrutiny on short-term market performance. The Wall Street Journal highlighted on 17 April that amid regurgitated concerns of a Greek exit

Neocortex Rational or Thinking Brain

Limbic Brain Emotional or Feeling Brain

Reptilian Brain Instinctual or Dinosaur Brain

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and pending trade restrictions cooling a hot Chinese stock market, the Dow Jones Industrial Average experienced the largest one-day percentage drop since 25 March!

Just to be clear, we are talking about 17 trading days.

The dramatic statement creates the intended hype and underpins a laser-like focus on short-term volatility. This also reminds us of a neat quote (the origins of which are debatable, but the message inescapable) about the use of statistics and numbers, “... when statistics are used as a drunken man uses a lamp post, for support rather than illumination.”

To investors who are saving for retirement, children’s education or even a rainy day, what does this apparent volatility mean? The short answer is absolutely nothing.

Behavioural scientists refer to this phenomenon as myopic loss aversion.

When, as investors, we lose sight of the big picture and develop an unhealthy fixation on what is directly in front of us, the result may be flawed decision-making.

The term “myopic” refers to being shortsighted; an illusion of volatility is created when we constantly evaluate portfolio performance (gaze at our online share trading account balances every evening, these days with a stiff drink).

For example, if we bought our MTN stock at R180 and one month later it closed at R198, we have made a 10% gain (we are in the win zone). Investors in the win zone are naturally risk-averse and will actively steer away from taking additional risk. In this case, research confirms we are prone to selling the stock prematurely, particularly if we have been monitoring market data regularly which has created the illusion of additional volatility (myopic risk aversion discussed earlier). More closely related to the market turbulence trap is when our MTN stock closes at R162 (10% down). We feel losses around 2.0 to 2.5 times more intensely than the equivalent gain and as such we will take risk in order to avoid the possibility of a loss.

In this case, we find ourselves likely to hang onto the stock (selling means realising the painful experience).

indication of the risk linked to our investment objective (and more emotional capital).

The limbic system of the human brain evolved with the introduction of mammals and serves the function of trying to move us away from danger based on experience or memories.

In essence, we perceive a level of risk that is not consistent with the actual risk we are exposed to given a long-term investment objective. For example, the MTN stock was up nearly 12% for the month of April followed by a sharp fall of over 30% in the following months to September.

Investors with a five-year investment objective should be more concerned about five-year rolling returns where the addition of any particularly good or bad month will make relatively little difference to the five-year performance figures. If we monitored only these numbers, we would see far less red and for more green, giving us a more accurate

The amygdala (at the base of the limbic system) evokes powerful emotions such as fear and panic which manifest in physical symptoms such as elevated body temperature, increased heart rate and sweaty palms. These are the precursor to the “fight or flight” response sent to your executionoriented reptilian brain that will determine your physiological reaction.

Neuroscientists have found that we can rewire our brains to isolate neocortex rational thinking from emotion, but only by creating new neural pathways, a form of cognitive behavioural therapy. This takes time and deliberate effort, in the absence of which, we as investors should try and remember the following two additional pitfalls lie in waiting; 1. The “disposition effect” means that we evaluate risk differently depending on whether we are in the win or lose zone.

2. Secondly, “cognitive dissonance” means that we will search for information that is consonant (aligned) with our cognitions or belief system and filter (ignore) that which is dissonant (misaligned). Human beings have fragile egos and ascribe self worth to the relative success or failure of financial decisions. For example, if we fall foul to the disposition effect, we will search for good news about our MTN stock and filter our news that points towards making the sale and realising the painful loss.

So, when faced with market turbulence traps, what is the best advice? Keep the laser-like focus on your investment objective instead of on the underlying securities. This neatly captures the value of a financial advisor or wealth manager, which is no more picking you the next top performing fund manager than it is predicting the next time the Springboks will lose to Japan or even the next filly to win the Triple Crown (the odds of success in any of which are more aligned than you may think).

A financial advisor should manage risk and get a client to their goals taking the least amount of risk possible. Investment clients are (on average) not realising even close to what the general equity market delivers, pointing strongly to an over-focus on performance and risk.

As investors we need to take responsibility and save more so we can obsess less about performance and as advisors, we need to educate investors about the true value of the service we provide.

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Investment

The long game will work out A

By Graham Bell, Equities Strategist, Old Mutual Investment Group

ugust was a frantic time for global markets, with a large-scale selloff casting a dark cloud over emerging markets prospects. The US Federal Reserve’s (Fed) decision to keep rates unchanged in late September puts the spotlight back on weak global growth.

However, a US survey of China’s economy, based on the Fed’s Beige Book, indicates that the Chinese economy is not nearly as weak as commonly believed, with services, which make up more than 50% of its gross domestic product (GDP), growing strongly and gaining momentum.

So looking beyond the current growth slump, what is the outlook for China’s economic landscape over the longer term?

China’s National Bureau of Statistics made headlines in September with its less-thancompelling revision of its 2015 GDP growth forecast from 7.4% to 7.3%. For Chinawatchers, who believe the actual rate is only 4-5%, the revision confirmed that Chinese economic data is notoriously unreliable, if not plain wrong. To build a mosaic of the real state the economy, analysts must survey a wide range of data but a number of indicators like electricity output, rail traffic, vehicle sales and exports point to continuing weakness.

Walking China’s streets on a recent trip, I noticed that signs of economic activity vary widely. For example, on the densely crowded, rush-hour Beijing underground everybody has a cellphone. Mostly

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younger generation, these commuters are messaging, watching video, playing games and shopping online. They barely look up between stations. On the streets, JD.Com delivery scooters are everywhere, plying the streets with their distinctive maroon colours.

But across a large swathe of the industrial north, provinces like Gansu, Liaoning and Heilongjiang are coming in well below their growth targets and many plants are idle.

National rail freight volumes have slumped by 14%, the biggest decline in over 25 years of available data.

True, over the past few years China has followed a course of monetary tightening that would have laid many an economy low.

The real exchange rate has risen over 30% since 2010 while bank credit has slowed sharply. In the ‘shadow banking’ sector credit growth has plummeted from over 50% in 2010 to just 16% recently.

However, China needs to be viewed in both a short- and long-term context. In the short term, it has announced a range of measures to turn economic momentum back up. This is not the big bang spend of 2009 when it pumped trillions into the economy, only to be left with a large bad debt headache.

Spending is smaller scale and tailored to specific sectors. More lies ahead in the form of lower reserve requirements and interest rates along with some fiscal stimulus.

Recently there have actually been faint signs of acceleration in the housing market and money supply and credit growth.

for China Longer term, President Xi Jinping is in place until 2020 and controls all the main levers of power. China has embarked on a wide range of reforms, with the focus on moving up the value chain and accelerating consumer spending and services. This does not mean that infrastructure will be neglected, far from it, as China’s capital stock is still low by developed country standards.

But the focus looking forward is on the services sector which is already taking off – movie ticket sales are rocketing, internet usage is widespread and e-commerce is surging. The roll-out of medical services, tourism, logistics, banking and insurance will continue at a frenetic pace. Already services make up 50% of the total economy, having overtaken the secondary sector (manufacturing) in 2012. High-speed rail links are connecting huge urban conglomerations across the country, enhancing the spread of the knowledgebased economy.

The question is whether this ‘long game’ can move China to rich country status.

Can it fully unleash the innovative drivers necessary to make the transition? There is a feeling that the state-owned banks and enterprises lack the creative flair and freedom to give China’s private sector room to leap forward as it must to achieve this goal. It’s worrying that China’s education spend is actually quite low, at below 2% of GDP. This is at odds with international test score comparisons where China does well. But this may be testimony more to the ability to take tests by

a motivated elite rather than a general level of education. Research and development spending per capita is also low.

The private sector is held back by a number of impediments. Notably, state-owned banks appear particularly cumbersome and interest rates for companies outside the stateowned sector are high. This is aggravated by deterioration in banks’ asset quality with exposure to ailing mining, manufacturing and provincial sectors, which have seen a steep dive in profitability.

Rapid urbanisation has been a feature of China’s growth path over the past generation. However, further gains are not assured. Many big cities have become unpleasant places to live and work for those pouring in from rural areas. The urban ‘hukou’ system, which grants rights to urban dwellers, is being reformed, but at a snail’s pace. Non-hukou families in urban conglomerations live tough lives, sending their kids back to grandparents and school in rural areas, which contributes to family breakdowns. On the face of it changing the hukou system will enable another big surge in China’s urban population, boosting productivity, but this appears to be part of the long game and is only in test mode so far.

China’s impact on the global economy is a magnitude greater than a decade ago. In 2001 its GDP made up only 7% of the world total and was about 35% of the US’s. This year the comparisons are 17% and 105% respectively. In short, while the US economy

is recovering fairly well, it is no longer the ‘big gorilla’ in the global economy. China needs to come to the party too for the global recovery to retain momentum. From a South African viewpoint the focus on China is through the lens of commodity prices, which have tanked in recent years as the key buyer has slowed down.

Some worry that the recent plunge in Chinese equity markets is a sign of a wider malaise in the economy. This is probably overblown. The market had risen by 150% in quite a short time, boosted by a ‘close your eyes and buy’ retail casino mentality on the back of margin credit. The subsequent correction has been poorly managed but does not appear likely to pose a systemic risk to the economy. For instance, there are several circuit breakers. China has huge foreign exchange reserves and its banks have big cash holdings. Central government debt is relatively low. In due course the authorities are likely to encourage further rises in equity prices as this will help China to reduce its reliance on debt.

My view is that the long game will work out for China. Despite demographic problems stemming from the one-child policy, over the next decade the huge population, massive urbanisation, economic reforms and infrastructure spend will gradually turn China into the world’s biggest consumer and services economy, with all the scale benefits that implies. We have to hope that the next two years see China managing this tricky transition without triggering another tail event in global markets.

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international news

Financial planning...

a recognised global profession CFP® certification seen as symbol of professional excellence

During his visit to South Africa in September, Noel Maye, CEO of Financial Planning Standards Board (FPSB), caught up with Tsholofelo Dihutso, CPRP, editor of The Financial Planner magazine to chat about FPSB’s promotion of financial planning globally and its efforts to grow the global CFP® professional community.

Could you first introduce FPSB and yourself to our readers?

Financial Planning Standards Board Ltd. (FPSB) owns the international CFP®, CERTIFIED FINANCIAL PLANNER® and the CFP® Logo marks outside the United States, and oversees the administration of the CFP® certification programme in 26 territories with more than 160,000 CFP® professionals.

At FPSB, our role is to set standards for the profession globally and also to develop

48

CFP® certification requirements based on those global standards, but adapted for each territory. We do this so that consumers around the world are able to identify financial planning professionals who are competent, ethical and committed to working in their client’s best interest.

As CEO, my role is to communicate the vision of the organisation and to ensure that, together with FPSB's staff and a robust global volunteer community, FPSB executes the strategy, agreed upon by the Board

of Directors and the Members, which will ensure that financial planning becomes a recognised global profession.

Tell us more about FPSB’s strategy Our vision is to establish financial planning as a global profession and the CFP® marks as the global symbol of excellence in financial planning. The way we describe our strategy is through LASER, which is broken down into the following areas:

Leadership We want FPSB to be seen as the preeminent standards authority for competent and ethical financial planners at the global level, and for the financial services industry in each territory to recognise and embrace FPSB’s member organisation as the leading professional body for financial planning.

Clearly, based on the meetings I’ve had recently in South Africa, the Financial Planning Institute of Southern Africa (FPI) is recognised as the leading professional body for the financial planning profession in South Africa, and that’s an accomplishment all of us can be proud of.

But, we can’t just be focused on recognition of the profession by our key stakeholders – we have to make sure it’s sustainable too.

One FPSB network chief executive recently said, “We need to approach our decisions and programmes from the viewpoint that we’re building a profession that will serve consumers for eternity.” So, FPSB is working to ensure that our member organisations are set up as businesses, and our approaches to standards-setting and certification will sustain and thrive long into the future.

The third leg of our leadership strategy is growth. Growing the number of CFP® professionals and expanding our global footprint by entering new territories is a primary focus for FPSB. But we’re not talking growth just for the sake of numbers, but growth so that consumers around the world who want access to financial planning can find a CFP® professional. In this area, we’ve set ourselves a target of having 250,000 CFP® professionals in 40 countries and territories by 2025 by making CFP® certification the must-have designation for those providing and those seeking financial planning advice.

Awareness This is one of our biggest challenges globally, and also our greatest opportunity.

In every country around the world, FPSB wants consumers to be aware of the benefits of financial planning and the value of working with a CFP® professional. To understand the barriers and opportunities that consumers face when it comes to finances and to understand their experiences with financial planners/ financial advisors, we launched a ground-breaking global consumer survey in 19 territories among more than 19,000 consumers. The results confirmed that consumers around the world are generally not confident, don’t stick to their financial strategies, and don’t feel knowledgeable about financial matters. But, kudos to CFP® professionals around the world, our research showed that those with a financial plan and those working with a CFP® professional felt more satisfied, more

in control, and were more likely to stay on track and achieve their goals. Not only that, CFP® professionals rated more favourable than other financial planners /financial advisors on multiple aspects of the client engagement and financial planning process.

This is no surprise to us, but its information we need to get out to the world. The message – “Life’s better with a CERTIFIED FINANCIAL PLANNER® professional.” We will be working with FPI and the other member organisations that make up FPSB’s global network to launch local marketing campaigns to help communicate the key findings from the survey results.

very much in the partnering business. We also see ourselves as a global incubator for professional financial planning bodies.

FPSB has started a mentorship programme to provide knowledge transfer opportunities within the global FPSB network. We are pleased to have FPI participate, both as a contributor of knowledge and as a learning organisation, so the global programme can be enriched by South Africa’s knowhow, and FPI can bring best practices from around the world to make the South African CFP® certification programme truly world class.

Standards

We don’t get to recognise ourselves as a profession – that must come from others.

And two main stakeholders that we want to recognise the benefits of financial planning

FPSB’s role is to establish standards for the global financial planning profession, and

Recognition

Tsholofelo Dihutso, CPRP interviews Noel Maye, CEO of FPSB

then to ensure that those standards are maintained and enforced by FPSB member organisations. While FPI oversees and reinforces the CFP® certification standards for individual professionals in South Africa, FPSB ensures that FPI and each other member organisation is administering and enforcing the programme consistently with the goals and standards of the global programme. We do this through an audit mechanism that we conduct regularly. I’m pleased to say that FPI has achieved Tier 1 status in its assessment with FPSB, the highest ranking in terms of the quality of the processes, procedures and delivery of the CFP® certification programme.

and the value of working with a CFP® professional are regulators and firms. When it comes to regulators, we have a tremendous opportunity to demonstrate how FPSB can support and align with regulators on overseeing the financial planning profession.

Regulators seek to protect consumers; FPSB's network seeks to benefit consumers.

Regulators want to see more competency, ethics and professionalism emerge in the financial services community, and that’s what FPSB has been doing for over 40 years.

When we talk to regulators and legislators, we present ourselves as a partner that can establish and then oversee standards and certification requirements for the financial planning profession.

Engagement Although our global footprint is substantial (26 member organisations in as many territories), FPSB and its member organisations are non-profit professional bodies with limited resources. It is critically important that stakeholders engage with, and align with, us so we can achieve our vision and mission. So, we see ourselves

Firms are a key channel to support FPSB and the global CFP® professional community to reach even greater numbers of consumers, demonstrating the benefits of financial planning and the value of working with CFP® professionals. FPSB conducted research with 92 firms in 12 territories, representing more than 120,000 financial advisors and 11,500 CFP® professionals. The

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feedback from these firms’ chief executives, heads of human resources and heads of marketing was fantastic: employing CFP® professionals leads to more productivity, more profitability, reduced legal risks, reduced client complaints, increased client satisfaction and more satisfied employees who stay longer with firms. We are working with FPI and our member organisations to get these messages out to firms to reinforce the benefit of employing CFP® professionals and encouraging firms to join us on a journey to providing client-centric, competent and ethical advice to consumers.

You earlier talked about mentorship programmes in the engagement pillar. Do you find that firms that were surveyed are more open to such programmes?

The firms I talk to are focused on developing career path opportunities for new entrants to the financial services industry, and supporting them on the journey to becoming competent financial planners. FSPB is very engaged with large firms, as they are in a position to provide the bulk of mentorship and career development opportunities for new entrants to the profession. And they are the channel by which many consumers will access financial planning and the services of CFP® professionals. That’s why, we introduced a supervised-experience element as an option for CFP® certification. This opportunity is already in place for competent and qualified CFP® professionals to serve as mentors for those coming into the profession, and we want those with experience to pass their wisdom to new entrants.

FPSB and its member organisations are also working with firms that seek to create cultures that embrace client-centric advice and financial planning as a fundamental service in helping consumers manage their finances and achieve their life goals. To support these firms, FPSB launched a “soft skills” Engaging

Clients for Life programme. This interactive educational course was piloted last year in South Africa in Liberty and Standard Bank Financial Consultancy (SBFC). We took financial planning elements and distilled them down to the essence of meaningful client engagement with the clients’ needs, goals and objectives in mind, so the solutions are truly beneficial to clients. The feedback we received was positive, and we continue to engage with companies in South Africa and around the world on this type of approach to client service.

What initiatives have you put in place for consumers to provide access to professional financial planning?

At the global level, FPSB’s focus is to talk to organisations about introducing the concepts of financial planning and holistic frameworks into financial literacy programmes. In 2015, FPSB joined the Organisation for Economic Co-operation and Development’s (OECD) international network for financial education to highlight the role that financial planning can play in national financial literacy strategies.

FPSB supports partnerships that call for all parties to come together to reduce overlap, provide a clear focus for programmes, and have measureable outcomes. Our contribution to these conversations draws on our global research highlighting that consumers with a comprehensive written financial plan and a professional financial planner achieve better outcomes.

What are FPSB’s plans in growing the profession in emerging markets, and what role have emerging markets played in FPSB’s growth?

We are currently in 26 territories and have an ambitious goal to add 14 more territories by 2025. Much of the organisation’s and the CFP ® mark’s success

is based on the input and contributions of volunteers and staff around the world, including those in emerging markets.

When we look at the contributions of South Africa internationally, it is phenomenal.

Throughout most of FPSB’s existence, we have had a representative from South Africa serving as a member of our Board of Directors. We’ve also had South Africans serve on FPSB’s Global Body of Knowledge group, our Communications Advisory Panel, and South Africans currently chair our Regulatory Advisory Panel and Developing Markets Forum. Godfrey Nti is part of FPSB’s new Chief Executives Committee, which is a group of CEOs from FPSB’s larger markets who have agreed to mentor newer organisations in the network, and engage with FPSB’s Board of Directors on executing the collective interest of FPSB’s network.

FPI has been very strategic about the development, delivery and promotion of the CFP® certification programme in South Africa, particularly in promoting financial planning as a service for all and driving increased access by the middle market to professional financial planning. FPSB will draw on this experience as we grow our programmes into new markets.

What message do you have for our readers to help increase financial literacy in South Africa?

You’ve heard of the saying “It takes a village to raise a child.” Well, it’s going to take a global village to raise financial planning as a recognised profession around the world, and it’s going to take all of us (professional bodies, firms, educators, regulators, consumer groups and media) working together to increase financial literacy. We have the opportunity to promote the goal that all consumers deserve to have successful lives where they rule their finances, and not the other way around. We want consumers to be smart about money, and also to know that having a written plan and working with a competent and ethical financial planner are smart moves.

There’s a tremendous opportunity for all the Financial Planner readers – whether they are CFP® professionals, on their way to becoming CFP® professionals, firms, educators, trainers, or even allied professionals – to join us on this journey.

We need all the support we can get. We are very clear on what our mission is and who we want to serve. The reward in all of this is happier people, more stable families and economies, and ultimately the ability to say that we have played a key role in establishing the world’s newest profession so that consumers around the world can achieve the lives they deserve.

Gofrey Nti (FPI CEO) and Noel Maye ( FPSB CEO)

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international news

South Africa contributes to Financial Planning Standards Board’s Global Body of Knowledge for Financial Planning Profession

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t its recent biannual meeting in Tokyo, Financial Planning Standards Board Ltd. (FPSB) approved updates to FPSB’s Financial Planner Competency Profile, Financial Planning Education Framework and Financial Planning Practice Standards.

The revisions to FPSB’s Global Body of Knowledge for the Financial Planning Profession were the result of a yearlong consultation process that involved FPSB’s Board of Directors, FPSB’s Body of Knowledge Working Group, members of the global academic community and financial planning bodies representing nearly 160,000 CFP® professionals in 26 territories around the world.

skills and competencies practitioners need now or in the next five years to effectively engage with clients in a financial planning relationship.

• FPSB’s Financial Planning Education Framework - guides the structure, content and learning outcomes required of financial planning education courses globally.

• FPSB’s Financial Planning Practice Standards - establish the level of performance expected of a financial planning professional, in addition to norms of professional practice for financial planning around the world.

clients. He highlighted that the global standards-setting body for the financial planning profession, FPSB continually reviews and updates the Global Body of Knowledge for the Financial Planning Profession to ensure the content and standards that support it remain rigorous and relevant. The goal is to ensure that CFP® professionals continue to meet competency, ethics and practice standards that reflect current practice needs and environments around the world.

Flying the South African flag high

More on the approved elements • FPSB’s Financial Planning Competency Profile - identifies the knowledge,

Speaking at the October meeting, Noel Maye, FPSB’s CEO said that the changes in market conditions, the use of technology, and an evolving regulatory environment all affect how financial planners work with

FPSB member organisations, including South Africa, and educational and training bodies will now adapt the updated Global Body of Knowledge for the Financial Planning Profession for use in their respective territories.

Wessel Oosthuizen, CFP®

Esther Venter, CFP®

Shirly Hyland, CFP®

Wessel Oosthuizen, CFP® (FPI Centre for Professional Development), Esther Venter, CFP® (Milpark Education) and Shirly Hyland, CFP® (University of Free State) were among the educators and academics who contributed immensely to the revisions of FPSB’s Global Body of Knowledge for the Financial Planning Profession.

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practice management

clients?

Where are all the

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s many financial planning professionals plan and prepare for the New Year, the perennial challenge of growing a practice with new business remains. Most financial planners rely on the “referral model” where existing clients and new opportunities refer their peers. This model is effective as referrals of peers often have similar risk profiles and income therefore if one has a “good quality” book of clients in a practice, a practice can organically grow.

Technological revolution

By Gerald Mwandiambira, CFP®, FPI Media Award 2015 and Acting CEO, South African Savings Institute (SASI)

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The global technological revolution now ensures that most individuals have access to a “smart device”, connected real time to the internet and through social networks.

This means that as financial planning professionals there are now many new opportunities and clients “hidden in plain sight”. These individuals are hungry for information and happy to engage with CFP® professionals at all times. The main

challenge is that most clients are relaxed and surfing the internet between 8pm and midnight, and a CFP® professional may need to be available at these times to engage with potential clients. The world literally never sleeps anymore and being available during these hours may allow your practice to have an “edge” on competitors who stick to the “nine to five” regime.

Social media In the last issue, we discussed ways in which professionals can start using social media to reach out to clients sharing information through blog posts. An expansion on this theme is to be prepared to engage real-time with clients and to mine social networks of existing business. In order to reach networks of your existing business, you will need to establish if they are active on social media platforms like Facebook, LinkedIn, Twitter, Instagram and Pinterest. This may involve changing the information you store on existing clients by adding these data fields

to your client profiles or current customer relationship management (CRM) system.

This means that with all new meetings this information is collected and it will be a standard on new business moving forward.

•

Consent and engagement Once clients and prospects have agreed to share this information, it is essential that they agree and consent to you contacting their network through them or mentioning that they are your clients or in your network.

With this consent, the next step is to make a cyber-connection with your clients by “following” or “friending” them. These relationships will need to be both ways.

This allows you to see the networks of your clients. You can also no longer wait for referrals as your clients entire life is made available to you in one click.

How to engage with new networks The next steps are the most important and needs to be well planned.

• You need to tell your potential clients what you can do for them. Establish a brand and visual identity so you can use a logo or a friendly, clear and professional picture yourself.

• You will need to have a professional look and feel expected of a CFP® professional while using a tone that is appropriate in your message. Social

•

•

•

•

networks are witty, light hearted and not long winded so this is not the place to use fancy complicated jargon.

Never assume you know the audience, rather choose to be led by the audience on which information you post unless there is a hot topic being discussed.

Never get comfortable and remain open to a changing environment daily, what worked last week may not work next week.

You can create a fan page using Facebook. Twitter offers great statistics on your reach and when in forums, do not forget links to your website or other social media presence.

It is important to try post information that encourages conversation and interaction. It is not so effective to try and be prescriptive in an environment where everyone has a search engine available to look for facts.

Try and build your own community and at the right time you can request to meet in person formally and often these meeting is initiated by the prospect based on the quality of your conversation.

Just like with prospecting, try and set targets around growth and translation of your network into viable leads and clients. Do not be overly aggressive and it is important to give the social media role to your staff that may be very active on these platforms if this is not your passion.

• It is important to be sincere and understand the tricks and language on various platforms. It may be wise to learn and test as you go along.

Smartphone applications (Apps) It is also possible for your practice or business to invest in an app which can be shared by users. It will allow your clients to manage their account with you or contact you. You can also include financial calculators with games allow for interaction with clients. The most sophisticated apps allow for the tracking of user behaviour and trends using customer touch points and measure service experience. It is fast becoming a trend in developed markets to offer an app in the same way they offer a website. Apps can also be used to link all social media platforms and feed all activity into the app to view.

The future It is clear that the way we engage with clients will continue to change; it may be time for CFP® professionals to start reviewing client acquisition strategies depending on their target market. There is a client group that appreciates personal contact and is not technologically savvy; however there is a large youth market that talks with their fingers. It is important to cater to this market if your business strategy is pointing in this direction.

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Research

Comparing SA Annuity options at retirement

The research paper was presented by Jeannie De Villiers-Strijdom, CFP® professional and director of the Postgraduate Diploma in Financial Planning at Stellenbosch University, at the FPI Professionals Conference in June 2015. The paper originates from her master’s thesis first published in the Journal of Economic and Financial Sciences.

About the research In the study conducted, in total 47 different annuity strategies are compared historically for South African males who retired during the 30 years from 1960 to 1989, with the view to establish which of these annuity strategies provided the most financial benefits in present value terms. In particular monthly annuity payments, or pensions paid, based on R1 million invested, were calculated and discounted to present values in order to compare values as at retirement.

By Jeannie De Villiers-Strijdom, CFP®, Director of the Postgraduate Diploma in Financial Planning, Stellenbosch University

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The 47 annuity strategies are as follows: • nine living annuity strategies (three drawdown strategies combined with three asset allocations); • two life annuity strategies; • 18 composite annuity strategies (nine living annuity strategies combined with

two life annuity strategies); and • 18 switching annuity strategies (nine living annuity strategies switched to two life annuity strategies).

The present values for each of these strategies were calculated for a hypothetical male annuitant retiring at ages 55, 60 and 65, respectively.

With respect to the living annuity strategies, the performance of the underlying investment account was calculated using existing equity and bond market index data with the following assumed asset allocations: a conservative (25% in equity; 75% in bonds); a moderate (50% in equity; 50% in bonds); and an aggressive (75% in equity; 25% in bonds) risk profile.

The initial drawdown rates used in the study followed the recommendations of the Life Offices Association (LOA), currently known as the Association of Savings & Investments South Africa (ASISA) as follows: 5.5%, 6.2% and 7.3% for males aged 55, 60 and 65, respectively.

strategies (where living annuity strategies are combined with life annuities on a 50/50 basis), which in turn outperform switching annuity strategies (where living annuity strategies are switched to life annuities 10 years after retirement), whereas life annuities yield the lowest return.

The three living annuity drawdown strategies that were considered are those in which the drawdown rate; (a) is maintained throughout; (b) is adjusted to increase the Rand amount (i) by 5%; (ii) by the annual inflation rate; and where in (b), the two respective strategies (i) and (ii) stay within the legal limits of between 2.5% and 17.5% of the underlying investment value.

According to De Villiers-Strijdom, there is a need for future research as there was, for example, no explicit risk measure used in the study, as the argument used was that cash flows not meeting a certain minimum level will be reflected in the present values of the various annuity strategies.

Research findings

In addition, the research covers a total period of 50 years (January 1960 to December 2010) and includes periods of market and inflation highs and lows.

Nevertheless, it could prove fruitful to determine, for example, the number of times a cash flow payment did not meet a certain minimum benchmark level, after which the size of such shortfall could then be determined.

In contrast to previously held beliefs, the calculations demonstrate that living annuity strategies are superior to composite annuity

Other limitations of the study are that it is based on fixed assumptions, and thus the conclusions should be interpreted with

The living annuity portfolios were rebalanced annually to maintain asset allocations.

The two life annuity strategies considered are: (a) a level annuity; and (b) an annuity increasing by 5% every year.

some degree of caution. For example, it was assumed that the male annuitants’ life expectancy was that of a (55) life mortality table as published by Cambridge University Press in 1953.

Since there has been a considerable increase in mortality ages world-wide, retirees with all their retirement capital invested in living annuities should be very cautious of withdrawing income in excess of 5% per annum, as longevity risk could have the detrimental consequence of pensioners outliving their retirement capital. Moreover, below average investment performance could exacerbate the problem.

In conclusion There are many additional factors that should be taken into account when choosing an annuity at retirement, for example the retiree’s state of health, the amount of retirement capital available, whether the retiree will have alternative sources of income in retirement, and whether the need exists to provide for dependants in the event of the retiree’s death, as well as the degree to which the retiree would like to have control over retirement capital.

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Research

CFP professionals 速

lead the pack...

By Mandisa Magwaza, Team Leader: Member Engagement and Retention, Financial Planning Institute (FPI)

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S

anlam recently conducted research designed to evaluate the value of the CFP® designation among the company’s top performing CFP® professionals. The study had a qualitative and quantitative research component. The qualitative research included in depth interviews with the top performing CFP® professionals within the company who shared their views on the impact that the designation has had on their careers. The quantitative segment analysed data to ascertain productivity among CFP® professionals pre and post certification completion.

Being a CFP® professional is more than having three letters after your name. The CFP® designation is the pinnacle of professionalism in the industry and as such, is seen as the pre-eminent designation for a financial planner.

As an FPI Corporate Partner™, Sanlam supports FPI’s mission to professionalise the industry and support their staff who wish

implementation workshops, case study refresher sessions as well as leadership workshops. The respondents also indicated a preference for learning centred on client engagement and selling skills as opposed to in depth product training and internal systems.

FPI caught up with Sanlam’s general manager, Jaco Coetzee, to provide context on the study and plans it has in place as a result of the findings.

Sanlam’s vision is to be the most professional financial advice sales organisation in South Africa that treats clients fairly while doing business in a profitable and sustainable way. Jaco explained that the research highlights the positive impact of hiring CFP® professionals across numerous areas of business. Sanlam will remain committed to improving the professional standards of financial planners. The company encourages financial planners to use the CFP® certification programme as a tool to further their financial planning career.

...in Sanlam’s top 100 professionals to set themselves apart by pursuing the CFP® certification. The respondents who participated in the research believe that earning a professional designation is a demonstration of an investment in oneself; furthermore they indicated that the underlying postgraduate qualification allowed them to enhance their technical knowledge and stay current with industry developments. Respondents indicated that more than a boost in one’s professional profile, the intangible benefit was gaining the confidence and credibility to serve clients to their best ability.

As rewarding as it was becoming a CFP® professional most respondents admit that sacrifices were part of the process. The cost of time dedicated to their studies meant losing out on potential business and quality time with loved ones. Majority of the respondents said that their strong sense of discipline, ambition and goal realisation is what encouraged them to persevere.

The research participants indicated that formal learning was a crucial factor in determining the success of a financial planner, they added that the credentials gave them access to serving the affluent market.

Beyond securing a university qualification, majority of respondents agreed that continuous professional development (CPD) is key in practicing with confidence and building expert power. As a professional body FPI has a CPD policy that require members to maintain a CPD log of their learning and update it with the CPD training hours completed. In today’s business world, staying informed and keeping abreast of industry activities is one of the key factors to having a competitive edge and delivery of your best to clients.

CPD also allows you to enhance the knowledge, skills, attitudes and values that you already have. In life there is always a need to learn and develop no matter your age or expertise. Most of the respondents interviewed expressed an interest in business and

As part of Sanlam’s culture the company incentivises and recognises those who successfully attain their designation and continue to support them to maintain their membership with FPI. The study also observed a group of CFP® professionals’ performance, from year of study commencement right through post completion of the qualification and attaining the CFP® designation, to measure productivity (including new business, quality of business, client retention and sustainability).

Production scores reflect that obtaining a formal qualification positively impacts production figures:

Pre-CFP® certification During CFP® certification Post-CFP® certification 0

2

4

6

8

10

12

The above graph illustrates the reduction in production scores in the year that the CFP® designation was obtained, however there was a tremendous increase post completion of CFP® certification period.

Commenting on the findings Coetzee added that the results indicate that employing CFP® professionals is not just a matter of providing the highest professional and ethical service to clients but also delivering results to the company’s bottom line.

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Book Review

The Trust

Factor Trust is the one thing that changes everything

About the book

About the Author

After releasing his first book “The speed of trust”, which was a New York bestseller, Anton Swanepoel, CFP®, decided to mix pen and paper together again writing his second book “The Trust factor”.

Trust has always been and always will be a key ingredient for financial planners/advisors and intermediaries to build and maintain their businesses successfully. In his book, he explains the components of trust financial planners/advisors will have to master if they wish to grow their businesses in a highly competitive and onerous environment. His book, The Trust Factor, has received much support from inside and outside the financial services industry.

Anton Swanepoel, CFP®, holds a B.Iuris degree, a Postgraduate Diploma in Financial Planning and obtained a Masters Degree in FAIS. He is currently busy with his doctorate in investment planning (LLD). Swanepoel has more than 20 years of experience in the financial services industry. He acted as a legal consultant, broker consultant manager, financial planner, portfolio manager, compliance officer, independent FAIS consultant and trainer.

I was inspired by Stephen MR Covey to write this second book. In my first book, which he endorsed, Covey highlighted the importance, and correlation between trust and a financial planner.

Godfrey Nti, CEO of the FPI commented: “As a recognised professional body that grooms and accredits some of the finest professional financial planners in South Africa, the topic of trust is instinctively close to FPI’s heart. I cannot thank Swanepoel enough for taking time to put together this very informative and easy-to-read book titled The Trust Factor. We gladly encourage all professionals and aspiring professionals to read this book, evaluate the importance of trust and to start making critical decisions on how best to go about investing into developing what should be their biggest asset anyway – trust.”

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Swanepoel is a part-time lecturer at the University of the Free State’s Centre for Financial Planning Law, the Gordon Institute of Business Science (GIBS) in association with The University of Pretoria, Marcus Evans as well as Educor, an accredited training provider. He is also a co-founder and director of Amity Wealth, an independent network for professional investment advisors.

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