Opportunity - Issue 15 - 2021

ISSUE 15 • 2021

FEATURED IN THIS ISSUE… BEHAVIOURAL FINANCE | INVESTING TO A PLAN | WEALTH PLANNING

EXPERIENCED DUO JOIN OUR BOARD We recently strengthened our Nedbank Private Wealth board with the appointments of Andrew Corlett OBE and Jeremy Wilson as independent non-executive directors. Andrew has also been appointed as chairman of the board for our trust business, Nedgroup Trust. John Harris, who joined the Nedbank Private Wealth board last year as a non-executive director, has also joined the board of Nedgroup Trust.

Both Andrew and Jeremy have had successful careers at senior levels across the private and public sectors.

Their diverse backgrounds and extensive experience enable them to make a significant contribution to the functioning and governance of the Nedbank Private Wealth board.

Andrew is a non-practising English solicitor and Manx advocate, and is a past president of the Isle of Man Law Society. He served as chairman and managing director of the legal and professional services group Cains from 1998 to June 2018, during which time the firm received the Queen’s Award for Excellence in International Trade.

He has served on many Isle of Man government and supranational committees, and his former nonexecutive directorships include chairman of Barclays Private Clients International, and companies within the HSBC and Swire Groups. Currently, his principal non-executive directorships include the global fiduciary group Equiom and Gibbs Technologies. He was awarded an OBE in 2015 for his services to the economy.

Jeremy Wilson

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Jeremy recently retired as vice chairman of Barclays Corporate with Barclays Bank PLC. During his 47year career with Barclays, he worked across its major business units and in Australasia, Vanuatu, the United States of America, Europe and the UK. As part of his senior executive role for the bank he was, inter alia, chairman of its group credit committee, director of Barclays Bank Pension Fund Trustees, and chairman of Barclays Bank Egypt. He has also held several senior positions in the financial services industry, including chairman of The Bankers Association for Finance and Trade (BAFT), chairman of CHAPS, a director of TheCityUK and chairman of its audit committee. In addition to his responsibilities beyond Barclays, he was non-executive chairman of Bloomsbury Publishing PLC. He is currently chairman of the Whitechapel Think Tank, a forum for the public and private sector on distributed ledger technologies; a member of the advisory board of Form3 and chairman of QPQ, two companies which apply new technologies to emerging global business models. Jeremy also supports the University of Cambridge Institute for Sustainability Leadership.

We are delighted to work with them as their appointments add wide-ranging expertise to the board.

As part of the board rotation and succession programme, John Averty and Clive Parrish stepped down. We would like to take this opportunity to thank them both for their valuable contributions and the important roles they have played during their membership of the board.

Andrew Corlett OBE

INTRODUCTION We should be grateful that 2021 has started with some positive news in the shape of a last-minute Brexit deal and a new vaccine. These provide some hope we will move beyond the frustrating lockdown existence we have endured during 2020.

However, some commentators fear the burden on the NHS in the UK is likely to get worse before it gets better. I hope you and your loved ones remain healthy and well while we continue to play our part in protecting the NHS as they enter such an exceptionally busy period.

During the last year, I have been incredibly impressed with the Nedbank Private Wealth team. Despite their own personal challenges, such as balancing childcare and working from home, being distant from family members and facing the ongoing uncertainty of the virus, they have focused on supporting our clients and their colleagues through a very challenging period. I am very proud of what they have achieved.

We have continued to develop our mobile and web-based services, with new functionality released through the year. We have also launched a new website, increased our client communication and hosted multiple webinars, all of which can be accessed through our website. This communication is designed to help you frame your thinking about your financial plans and consider longer-term subjects, such as creating a wealth plan and developing a strategy to engage the next generation of your family, while protecting your options today.

Over the last few months, we have also completed the move of our London premises to a brand new office in Arthur Street. This office is well located in the City, has excellent transport links and has a new client meeting suite, which provides comfortable surroundings for meetings as we help you and your families develop your wealth plans and investment strategies. Of course, at the time of writing, in line with UK government guidelines, most of our UK staff are working from home, but as things improve, we look forward to hosting events and meetings at the new offices.

Finally, right across the financial services industry, we are continuing to see a significant increase in fraud activity, with a common tactic involving email spoofing, where email accounts are hacked and payment instructions intercepted. As a result, we will no longer be accepting payment instructions via email. If you have not already done so, we are asking all clients to sign up to use our mobile and online services, as the only secure way of submitting payment instructions. I know for some of you this may, initially, be inconvenient but this measure is being taken to protect you.

Thank you for your continued support and for working with Nedbank Private Wealth.

Best wishes,

Stuart Cummins, Chief Executive

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“With every new wave of optimism or pessimism, we are ready to abandon history and time-tested principles, but we cling tenaciously and unquestioningly to our prejudices.�

Benjamin Graham (1894-1976)

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WHY EMOTIONS AND INVESTING DON’T MIX David McFadzean, Head of Wealth Management

Often considered the ‘father of value investing’, Benjamin Graham wrote a book called The Intelligent Investor, which Warren Buffett described as “by far the best book about investing ever written”. Although written over 70 years ago, Graham’s quote is just as relevant today. It is often too easy to let our emotions sway investment decisions, or be swept along by the crowd.

Following the herd Known as herd mentality, this is where people are unduly influenced by what others are doing, rather than thinking rationally for themselves. Think of how often FOMO (the fear of missing out) is cited across age groups.

One of the most famous examples of herd behaviour in the investment world was the dot-com bubble. The late 1990s was a time of rapid technological advancement and many companies were seeking to commercialise the opportunities it offered. Investors poured money into new internet start-ups because everyone else was doing it, even though many of these companies lacked sound financial business models and had failed to generate any revenue, let alone turn a profit. Between 1995 and its peak in March 2000, the technologydominated NASDAQ Composite Index rose 400% to an all-time high, but by October 2002 the market had lost more than 75% of its value, giving up all its gains during the bubble.

Overcoming our biases Most of us are hard-wired to feel safer as part of a group, but when it comes to investing what suits one person is not necessarily the best course of action for another. Although we believe we always behave in a rational way, we are all affected by personality traits and ingrained beliefs. To understand more about how our emotions can affect our investment decisions, it helps to be aware of some of the behavioural biases at the root of them.

• Loss aversion – the fear of losing money is often the most common obstacle faced by investors. No matter how much experience we have under our belts, we tend to remember our losses more than our gains. No one sets out to lose money, and so we try (sometimes too hard) to avoid repeating them.

• Maintaining the status quo – here investors are comforted by following the same investment

approach year-in-year-out, rather than exploring any new opportunities that arise, or responding to ‘new normals’. We take comfort in the familiar.

• Confirmation bias – investors often view any new information through a lens that only focuses on reaffirming their existing beliefs, rather than as a catalyst for change. So, for example, as markets start to dip after a long period of upwards momentum, they don’t act. They want to believe that the markets will go back up and the drop was only a correction. They subconsciously shield themselves, meanwhile, against any information that could show the situation to be contrary to that view.

These behaviours can appear individually or together.

Whether you’re rushing into the latest fad or, conversely, resisting change because you’re convinced the decisions you’ve already made are the right ones, your investment returns are going to be affected.

So how can you overcome these emotional reactions and retain a more balanced approach? Acknowledging that behavioural biases may be affecting your investment decisions can be the first positive step towards managing them. A conversation with your wealth manager can also help you to take a more objective view, as well as being able to help you understand the longer-term consequences of your subconscious actions.

This can start with a review of your overall asset allocation and your appetite for risk based on your current situation. Then, in setting out what you hope to achieve from your investments, your wealth manager can use cashflow planning and forecasting to create the most appropriate strategy for you to achieve this outcome.

Once you have your investment strategy in place, you have a means to make more informed decisions based on your core principles and your medium to longterm goals. However, just because you have a plan, doesn’t mean it should be set in stone. Plans should be reviewed regularly to ensure they allow you to remain on track to achieve your agreed objectives. This is because your circumstances or aspirations change and small changes compound over time. Having a plan can help you stay your course, avoid being buffeted by emotions, and offer reassurance that your finances are working most effectively for you.

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DON’T JUST INVEST, INVEST TO A PLAN

By John Williams, Head of Wealth Planning

If you decided to build a new home, the first thing you would do is hire an experienced architect to draw up a plan. Meetings would ensue to discuss what you hope to achieve from the new build, what style you prefer, your budget, and timeline – all before a single brick is laid. Once the building plan is agreed and approved, foundations are laid and a project manager steers the build to completion – pushing you to make thousands of decisions until you have the house of your dreams – all, hopefully, within budget.

The greatest chance of success, in all areas of life, usually starts with a well-considered plan and investing is no exception. But you would be surprised by how many people do not have a plan or strategy, despite already being invested. Even fewer have a master plan that includes every investment and the rest of their wealth.

Wealth planning encompasses all of your financial life, including buying (or building) a house, putting kids through education, starting up a business, planning for retirement and leaving a legacy. It plots out short-term objectives (up to 5 years), medium-term goals (10-15 years, depending on your overall timeline) and long-term aspirations (typically 15+ years).

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Whether you already have a plan in place, or recognise you need to make one, consider some of the steps you should take to ensure it is a robust wealth plan to cover you and your loved ones.

Everyone’s situation is unique, so your plan should be carefully thought through around you too. We lay out eight steps to putting a plan in place:

1.

Take stock Review your current financial situation – assets, liabilities, income and expenditure – and see if you are on track to meet any immediate wealth objectives.

2. Set your goals It helps to discuss these with your family as they are often part of the plan and should understand the reasons behind your decisions. Your wealth goals will help you set up investments more effectively and should be an important determinant of the strategy you adopt. Whether you have multiple medium-term objectives, and one or two longer-term aspirations, each requires a different approach as part of an overall strategy.

3. Consider cashflow planning This brings together your current financial situation with your financial goals and timelines, and extrapolates the various income streams and investment returns, as well as your forecasted spending, to provide a picture of your future finances.

It enables you to determine how likely you are to achieve what you want.

4. Devise a framework to inform future decisions Life changes and you need to understand the ramifications of the different trade-offs you may need to make. Whether you retire at 55, or never want to, how much money will you be able to live off versus leave to future generations? This, for example, can dictate how much time you spend in retirement.

5. Set your investment strategy For most long-term goals, investing will be the core component, and your timeline and risk appetite are important. In addition, it makes sense to benchmark portfolio performance to your wealth goals rather than a traditional benchmark, such as the MSCI All Country World Index, not least as any changes can be tracked in a meaningful way.

6. Determine which tax-efficient ‘vehicles’ may be suitable for you You’ve chosen your investment approach, but how can you ensure it is working most effectively for you? This depends on where you are resident. For example, if you are a UK resident, are you using all of the tax allowances available to you in terms of ISAs or pensions, for example? Will you invest in your name or via a joint account? Our view is that any approach should be as diversified as possible.

7. Check all your important documents are up-to-date This may include making sure your Will and a lasting power of attorney are current. Another important consideration is life insurance, which can play an important and complementary role to hedge against future financial obligations for your family.

8. Assess regularly Once you have a plan in place, it pays to set a date to review it, possibly annually, to ensure it remains on track to meet your goals despite any changes to your life and that of your family.

In the Cantonese vocabulary, the word for eight is synonymous with wealth, due to the similarities in the characters’ pronunciation. And while the Chinese dialect is often deemed a difficult language to learn, due to its six tones and nine sounds, wealth planning doesn’t have to be that complicated. An experienced wealth planner can help you navigate the process, helping you make decisions along the way, as well as supporting the discussions with your family and other advisers.

It is never too soon to start planning. The earlier you focus on defining your goals and taking action, the better chance you will have of investing to achieve them. And of course, our experienced wealth planning team would be delighted to assist you in creating or updating your own wealth plan. Just get in touch.

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A NOTE TO MY YOUNGER SELF

By Rebecca Cretney, Investment Counsellor, Aged 62¾

Dear Rebecca, This is your 62-year-old self writing to you from 20 years in the future. Right now, you are in the middle of a coronavirus pandemic with no clear end in sight. But this too will pass.

I write here to ask you, my younger self, to plan. Planning is important, especially when it comes to things you can control, such as your financial affairs.

My first and most important advice to you is make a financial plan. Spend some time considering your long-term goals and aspirations, write them down. Some will be pipe dreams but many will be achievable. Prioritise them. Share them with members of your family, especially those they affect. Discuss and shape them together.

Then share your goals with an adviser who you trust. Statistically, you have a 65% chance of completing a goal if you commit to someone. If your goals are SMART — specific, measurable, attainable, realistic and time bound — and you periodically review progress with someone, your chances of achieving them increase to 95%*. So make time to review progress with your adviser once a year and make adjustments as your circumstances change.

But dear self, don’t limit yourself to immediate goals, like getting the kids through university (such a proud moment!) or buying a bigger house, also consider your retirement, protecting yourself and your family against the unexpected, planning the best way to gift or leave a legacy, philanthropy and charitable giving.

Having worked in the industry, you will know that the first step in this process is to carefully select your professional advisers, then trust them. Find someone who understands your vision and your time frames, and who you trust to manage your investments. A company who shares your views on the social, environmental and corporate governance aspects of portfolio management and can incorporate these into your strategy.

The world of investing offers you a huge array of choice, there is so much opportunity out there, even in the midst of a pandemic. But never lose sight of the investment principles you have learned through bitter experience (https://nedbankprivatewealth.com/spoiled-forchoice/). Principles which should form the cornerstone of your investment decisions. Keeping these will serve you well.

Don’t neglect your pension. Yes, dear self, you will one day retire. If you had planned sooner, I would be sipping a piña colada in Barbados by now! So do start planning for the fun we will have, even if it seems a long way off. Did you know that sensible planning tests whether you have enough to provide for you until you are 100? So factor in the cost of care and private medical attention, as a hip replacement may have to be considered!

So, dear self, let me state the obvious: the sooner you start saving and investing into a pension, the more we can accumulate. If you plan now, a cruise around the glaciers of South America need not be a once-in-a-lifetime-experience! Or we could go white water rafting down the Grand Canyon for your 65th, just like we did in Scotland for your 40th!

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This picture might help you plan, as our retirement is just around the corner.

Enjoy Spending

Simpler lifestyle

Supported lifestyle

Renovate the kitchen Aged care Mediterranean cruise

Helping with kids’ mortgages

Increasing health costs Regular social activity

TYPICAL SPENDING PATTERNS OF RETIREES

55

65

Maintain home

75

85

95

Age Teach your children and grandchildren about money while they are young. Start a savings plan for them and educate them on investing. I was given a great tip the other day: pay £2,880 per annum into our grandchild’s SIPP (self-invested personal pension) from birth until they’re 18, then stop. In the UK, tax relief grosses this up to £3,600. Total cost to you the grandparent will be £2,880 x 18 = £51,840. Assuming a growth rate of 5% per annum, when our grandchild retires aged 67, it will be worth £1,219,448!

Ensure your affairs are in order, as it will give you peace of mind. Get your Will written and think about a trust – you’re planning for your future and for the generations to come. Explore structuring and whether it can help you manage your finances more effectively. You have no excuse – you work with wealth planners who are just a phone call away!

Life is full of challenges and you will have many ups and downs, but your financial future need not be a rollercoaster ride if you plan.

But above all, dear self, remember that the most precious commodity you have is time - use it wisely!

Rebecca *According to the American Society of Training and Development (ASTD)

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A MAN IS NOT A FINANCIAL PLAN

By Allie Kirk, Private Banker

When Sherry Allen Harrison published her book A Man is not a Financial Plan in the US in 2007, it was a story that had been many years in writing, based on her experience that too many women rely on their husbands to set the course for their long-term finances. Her work also provides a parallel of the situation ‘across the pond’, that while many women are primarily responsible for household finances1, too often it’s the husband that manages the borrowing, investing and wealth management.

And it’s an easy sell. You don’t want to shoulder the responsibility for decisions that could, in hindsight, have been different — particularly when your pension and savings aren’t enough to fund your retirement in the style to which you’ve become accustomed. However, evidence is stacking up that women should invest, not least as they may even achieve higher portfolio performance than their spouses. According to analysis by Warwick Business School, women outperformed men at investing by an average of 1.8% over three years2.

How to begin While many couples divide tasks between themselves to make home life easier, it doesn’t have to be all or nothing.

A good start is probably sitting with your other half on a regular basis – perhaps initially more often, while you get to grips with what your wealth entails — and talking through your finances and portfolios. Not only should you then be able to discuss what’s happening and appreciate the decisions being made on your behalf, it also may give you more confidence ahead of any meeting with your private banker and help make sure you’re really engaged in the conversation.

Get to grips with the jargon While the team at Nedbank Private Wealth always aims to provide articles, commentaries, updates and webinars that are free from jargon, sometimes the odd word creeps in. To help, we are working on a glossary for the website, which will launch in the new year, but ahead of that launch, just email your private banker or client.services@nedbankprivatewealth.com and they can assist you.

Stay up-to-date Markets move quickly, and while we may be able to project the general direction of global markets based on the known circumstances at play, it is impossible

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for anyone to predict by how much markets will rise, or fall, and just how quickly – particularly in the light of the ongoing economic toll of the coronavirus pandemic.

But, within the broader movements that headline the news, there are often other market trends that we aim to articulate through the articles and webinars we regularly publish. Some of these only touch very briefly on the various developments, while others go into greater depth, but all are available on our website and flagged through email updates, which we are planning to increase in frequency in 2021. Email opportunity@ nedbankprivatewealth.com to find out more.

Focus on the long term Aristotle famously wrote “The more you know, the more you realise you don’t know”. However, learning anything is more likely to put you and your family on a path to better financial outcomes. In a survey in 2018 by Boring Monday, the team found that 33% of the 2,000 investors polled believed they could confidently explain what stocks or shares were, but only 12% felt the same level of certainty in explaining equities3. Learning that they are interchangeable terms takes seconds and, while other topics take longer to digest, given investments should be held for the long term, there is plenty of time to pick up knowledge.

And we’re here to help you understand what’s important – whether it’s details of the underlying investments or the reasons why scenarios typically play out and why.

As with much of the market’s reaction to the recent pandemic – situations develop that do not conform to the historical norms – but again these can be discussed.

It may be enough to have the knowledge that our team of professional investment specialists are employed to look after your client portfolios within our discretionary investment management service, and understand how their experience supports your wealth goals.

Whatever level of knowledge is reassuring, what is important is that you and your family are involved in your financial plan so as to best appreciate the long-term opportunities your wealth could achieve, as well as the complexities it may bring.

Sources: (1) YouGov Research; (2) Warwick Research; and (3) The words shares, stocks and equities are synonymous. A share is one equal part of a company’s capital, which is sold on a stock market. Through your investment, your share or stock entitles you to a portion of that company i.e. you are one of a number of individuals to hold equity.

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COMPANY NEWS SENIOR APPOINTMENTS TO THE RISK AND COMPLIANCE TEAMS

FIFTH CONSECUTIVE AWARD WIN IN MIDDLE EAST HONOURS For a fifth year running, we have picked up an award in the WealthBriefing MENA Awards for Excellence, and it’s our second as ‘Best Boutique Private Bank’ in the region. This year’s winners were honoured at a gala evening dinner at Dubai’s Sofitel Dubai Downtown on Monday 9 November. Andrew Bates, our head of private banking in the Middle East, and private banker Greg Smith, picked up the award on behalf of the team.

Chris Kirk

Lesley Corlett

As part of a planned restructure of our risk and compliance departments, Chris Kirk was appointed to lead the growing risk team. Chris has over 33 years’ experience in the financial services industry working for global blue-chip companies in London, continental Europe and Jersey, in addition to smaller challenger banks. Prior to joining Nedbank Private Wealth, Chris spent 30 years with HSBC Group and held a number of executive roles, including global head of financial crime compliance for the commercial banking division.

In his role, Chris leads the bank’s team of risk professionals supporting the business in its growth agenda across all our international jurisdictions. His primary responsibilities include second line assurance of activities including credit risk, operational risk enterprise wide, and prudential risk.

Chris’s appointment coincides with that of Lesley Corlett who joins as head of compliance. Lesley joined from Friends Provident International, where she managed a risk and compliance function of 25 people across the Isle of Man, United Arab Emirates, Hong Kong, and Singapore. Prior to this, she was the head of compliance for Barclays Private Clients in the Isle of Man. Lesley manages the compliance team across the Isle of Man, Jersey and UK, and will work closely with Chris as we further strengthen our financial crime framework. Both Chris and Lesley joined the bank’s executive committee and are based in the Isle of Man.

The WealthBriefing MENA Awards for Excellence are decided by a panel of private banking peers and wealth management’s trusted advisers and consultants, with the editorial team at WealthBriefing selecting the final winners from each shortlist.

The judges commented that Nedbank Private Wealth has consistently lived up to its promise of making clients’ lives easier, providing a joined-up approach to protecting and growing wealth, removing complex advice chains and offering a choice of servicing options – digital or face-to-face.

They also acknowledged our “impressive, highly qualified team and strong parent financial strength”, and commented on our “highly responsive and personalised service tailored to suit each client”.

We believe this independent endorsement underscores our consistent commitment to exceptional and bespoke service for clients. And it serves to further strengthen our reputation in the region.

This latest award joins our tally of other accolades from WealthBriefing in the MENA region. We picked up the Best Boutique Private Bank award in 2020 and 2019. We were singled out for recognition in the Innovative Client Solution category in the 2018 and 2017 awards, while the award for Best Private Bank (Client Service) was presented in 2016.

This publication does not constitute an invitation or inducement to buy or sell any investments, nor does it constitute any advice or personal recommendation. The value of investments and the income from them can fall, as well as rise and you might not get back the original amount invested.

Exchange rates may affect the value of investments. Past performance is not necessarily a guide to future performance. Nedbank Private Wealth and Nedgroup Trust do not provide tax advice. We always recommend that you seek specialist tax advice to suit your individual circumstances. The opinions in Opportunity are those held by the authors at the time of printing. All data herein is sourced from local exchanges via Reuters, Bloomberg and other vendors. The information herein has been obtained from public sources believed to be reliable. Nedbank Private Wealth makes no representation as to the accuracy or completeness of such information. If you no longer wish to receive this publication or any information about Nedbank Private Wealth’s products and services, please advise us in writing. Nedbank Private Wealth is a registered trade name of Nedbank Private Wealth Limited. The parent of Nedbank Private Wealth Limited is Nedbank Group Limited, which is incorporated in South Africa and is regulated by the South African Reserve Bank. The latest audited report and accounts, and details of the credit rating are available at www.nedbankprivatewealth.com. Nedbank Private Wealth Limited is licensed by the Isle of Man Financial Services Authority and is a participant in the Isle of Man Depositors’ Compensation Scheme as set out in the Compensation of Depositors Regulations 2010. For full details, please see www.iomfsa.im. Registered office: St Mary’s Court 20 Hill Street Douglas Isle of Man. The Jersey branch is regulated by the Jersey Financial Services Commission and is a participant in the Jersey Banking Depositor Compensation Scheme. See www.gov.je/dcs for full details of the Scheme and banking groups covered. The London branch is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registration No: 313189. Your eligible deposits with Nedbank Private Wealth Limited, London branch, are protected up to a total of £85,000 by the Financial Services Compensation Scheme, the UK’s deposit guarantee scheme. Any deposits you hold above the £85,000 limit are unlikely to be covered. Please ask for further information or visit www.fscs. org.uk. UAE representative office in Dubai licensed by Central Bank of UAE. Representation in South Africa is through Nedbank Limited. Registered in South Africa with Registration No 1951/000009/06, an authorised financial services and registered credit provider (NCRCP16). Nedbank Private Wealth Limited is licensed by the Financial Conduct Authority to provide regulated mortgages in the UK.