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28 February 2018 | www.moneymarketing.co.za

First for the professional personal financial adviser

WHAT’S INSIDE

YOUR FEBRUARY ISSUE

TAX-FREE INVESTMENTS: HOW ARE INVESTORS BENEFITING?

INNOVATIVE EMPLOYEE BENEFITS A COMPETITIVE ADVANTAGE FOR SMES

It’s beneficial to hold listed property companies in the form of REITs inside a tax-free investment. Page 16

Only 32% of SMEs have retirement funding on their agenda. Page 22

INSURANCE PREMIUM FINANCING: FAQS Premium financing is an option that benefits brokers, insurers and policyholders. Page 24

Can the ‘Ramaphosa effect’ last?

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ccording to a report by US and UK based Goldman Sachs analysts Caesar Maasry, Ron Gray and Sara Grut, South Africa is the ‘big emerging market story’ of 2018. The report was compiled after Deputy President of SA, Cyril Ramaphosa, was elected ANC leader at the party’s national elective conference in December last year. While it remains unclear exactly what sort of reforms Ramaphosa will carry out, Goldman Sachs still expects SA’s economic story to improve over the course of the year, forecasting that GDP could grow by 2.3% this year. Ramaphosa’s victory to secure the ANC presidential race has indeed been met by overwhelming investor euphoria, both domestically and abroad, says Steven Schultz, Head of Investment Marketing at Momentum Investments. “Unsurprisingly, the perception that the new ANC leadership will successfully root out corruption and boost the ailing economy has reignited confidence in South Africa’s ability to avert further downgrades by global

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rating agencies. There is little doubt that South Africa is in a much better space now than where it was when previous ratings decisions were confirmed.” While the initial excitement surrounding Ramaphosa’s victory may well be warranted, Schultz notes that the draw for the top-six positions in the ANC NEC renders an uncertain outcome for the timing and structural reforms necessary to avert a further ratings downgrade. “The market has clearly given the new leadership the benefit of the doubt. This however could quickly fade, unless the new leadership promptly begins to provide evidence of their ability to rebuild trust between government and the private sector. In addition, rating agencies will undoubtedly continue to pay close attention to government’s commitment to fiscal discipline and its willingness to address problems in South Africa’s notoriously problematic state-owned enterprises,” he adds. Izak Odendaal, Investment Strategist at Old Mutual Multi-Managers, points

THERE IS LITTLE DOUBT THAT SOUTH AFRICA IS IN A MUCH BETTER SPACE NOW out that South Africans have become so used to obsessing about politics over the past few years that there is a very important global backdrop that is often left out of the picture. “The global economy is currently experiencing the best patch of growth since the immediate bounce-back from the financial crisis, and all the major economies are experiencing positive growth. At the same time, inflation is low and fairly steady and therefore developed market central banks have the space to remove the emergency post-crisis stimulus measures gradually.

“Emerging markets bore the brunt of the global slowdown between 2013 and 2015: commodity prices plunging, capital flight and sharply weaker currencies,” Odendaal adds. “This led to a vicious cycle of falling growth and rising interest rates. The opposite is now the case, with firmer commodity prices, stronger currencies, and falling interest rates all improving the economic growth outlook. The International Monetary Fund’s upgraded growth forecasts ahead of the Davos summit confirm this.” Continued on page 2

2018/01/22 15:53


NEWS & OPINION

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NEWS & OPINION

28 February 2018

EDITOR’S NOTE Continued from page 1

Thinking back to when politics and markets collided most forcefully – the surprise axing of Finance Minister Nene in December 2015 – Odendaal says it’s clear that this happened at the worst possible time. “Commodity prices were at a low, sentiment towards emerging markets was extremely negative and there was huge uncertainty about the US Federal Reserve’s first rate hike in a decade. The market response was unprecedented, with long bond yields jumping almost 2% in a matter of days. Subsequent events, such as the firing of Minister Gordhan last year and the subsequent downgrade to junk status, elicited a much more muted response partly because they were not unexpected, and because the global backdrop was already improving.” He observes that this time, the collision between politics and markets is not only a positive one (in the sense that the market applauded Ramaphosa’s election as ANC leader) but also occurs amid this more favourable environment. “If this scenario persists the rand could strengthen further regardless of whether Ramaphosa takes over as president of South Africa soon.” Odendaal says that there will be a measure of ambiguity around policy as long as there are two centres of power: one in Luthuli House and one in the Union Buildings. “Nonetheless, there does appear to have been a shift in power from Zuma to Ramaphosa, which should give investors and ratings agencies cause for comfort – specifically, the appointment of a credible board at Eskom amid a funding crisis at the utility.” According to Schultz, the extent of South Africa’s economic recovery in the coming year and the associated outlook for the country’s sovereign credit rating will depend

heavily on whether or not government officials will adopt and enact policies that enhance the country’s creditworthiness. “Since the December ANC elective conference much progress has already been made; the rand is firmer against the US dollar, inflation should be kept comfortably within the Reserve Bank’s target band and the prospect of two further interest rate cuts in 2018 looks increasingly likely. “In light of the positive shift in sentiment, investors should remain mindful that even if fiscal consolidation efforts are reaffirmed in this month’s national budget, a significantly higher rate of growth would be required to reverse South Africa’s most recent deterioration in debtto-GDP profile and to absorb the overwhelming 27.7% of citizens that are currently unsuccessful in their on-going pursuit of employment. On balance, this would suggest that despite the improved sentiment, South Africa is destined to remain in the sub-investment grade category for some time to come.” Odendaal says a Moody’s downgrade in March would lead to South African government bonds being excluded from the Citigroup World Government Bond Index. “Passive investors that track this index will be forced to sell out, but our sense is that this is a relatively small portion of the total foreign investor base in our government bonds. The big fear in many quarters (including at the Reserve Bank as highlighted in the recent MPC statement) is that this will lead to capital outflows and a weaker rand.” But, as he notes, most foreign investors are probably more interested in high yields than ratings and SA’s bond yields are still among the highest of major emerging markets. janice.roberts@newmediapub.co.za

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F

inance Minister Malusi Gigaba and his colleagues at the National Treasury are currently preparing the 2018 budget in an extremely difficult economic environment.  It is already apparent that there will be tax increases – as hinted at during October’s Medium-Term Budget Policy Statement. But will these tax hikes do much to alleviate the Treasury’s R50.8 billion revenue shortfall? Or will the increases ensure that even less revenue is collected? And what if free higher education that is expected to cost R40 billion is taken into account? MoneyMarketing’s website will have a page dedicated solely to Budget 2018. The page will be, by the time you read this, live, with opinions from political leaders, economists, business and labour about what the budget should look like. On the day, 21 February, the main contents of Budget 2018 will be released on the page as soon as the Finance Minister begins his speech. MoneyMarketing’s site will also carry reaction to the speech. There is no doubt in my mind that personal income tax will be raised – but even this won’t be enough for SA to get itself out of the woods. Corporate tax could increase, but that won’t be any good for our image among investors. So where will the money come from? While the sugar tax may be brought in, it won’t make a noticeable difference. The fuel levy will probably rise and there’ll be the inevitable sin tax increases, but they won’t make much difference either. So what about an increase in VAT? This is surely the solution, but unlikely as the ANC hopes to win the 2019 general election and hiking the VAT rate would hit the poor. What is certain, however, is that Minister Gigaba will have one last chance to make a good impression on new ANC leader Cyril Ramaphosa when the budget is presented to parliament. Rumour has it that Ramaphosa sees former ANCtreasurer general Zweli Mkhize as a replacement for Gigaba. Janice janice.roberts@newmediapub.co.za @MMMagza www.moneymarketing.co.za

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4 NEWS & OPINION

28 February 2018

PROFILE PETER GORDON, CEO, FULCRUM GROUP

How did you become involved in the insurance industry – is this something you always wanted to do? After school I didn’t have a firm idea of the career I wanted to pursue so I enrolled for a BCom degree at Wits University. After graduating with a BCom Economics (with sub-majors in Marketing and English) I was offered the opportunity to join Alexander Forbes (which was then Price Forbes) as a trainee account executive. I saw it as a great opportunity to learn about insurance and get exposure to the world of business, so I took it. Twenty-odd years later I am still in the industry, having worked or had exposure to pretty much every aspect from broking, to risk finance, risk management, underwriting, reinsurance and insurance related private equity. How do you feel about your new role as CEO of the Fulcrum Group? I am very excited about the role and looking forward to the challenge. Fulcrum is a dynamic, forward-thinking business full of extremely capable, adaptable people with a diverse set of skills and experience. As a provider of business administration and capital solutions to the insurance industry we are very well placed to help our clients and prospective clients meet the challenges they face and take advantage of the opportunities they have. The industry is undergoing a period of significant change and disruption and with this comes great opportunity.

VERY BRIEFLY

How fast is the insurance industry evolving and how are brokers coping with the current ‘disruption’? I think what we’re missing as an industry is the important distinction between change and evolution. New regulations and technological advances have forced us to respond in new ways – in other words to change the way we do things. But in many ways, we’re still doing the same things. We are just doing them more quickly, more efficiently and on a larger scale. We haven’t so much actually evolved as an industry as just been forced to do the same things in a different way. I believe that the real, evolutionary change is still to come. It’s been on the horizon for some time and is getting closer. It’s created a lot of uncertainty and challenges, spawning a need to reassess business processes, build capacity and think about our businesses differently. But it hasn’t arrived yet. There’s a lot of turmoil, but not much tangible progress. We need to start thinking far more broadly about where we’re headed as an industry. How can brokers ensure they remain relevant? I firmly believe that there will always be an important role for brokers in the insurance valuechain. The challenge for brokers is to continually monitor and assess the needs of their clients – personal or business – understand their risks and offer them the best possible solutions to manage, mitigate and transfer these risks. There’s a huge amount of product and information available to brokers. You need to understand what’s out there, filter the information, apply knowledge and experience, and match the available offerings to your clients’ needs. That’s the role and value of the broker. As long as brokers continue to be meaningful partners in the identification, management and financing of their clients’ risks, they will always be relevant.

pharmaceutical wholesale and distribution business, increased turnover by 11.6%, ahead of selling price inflation which averaged 6.2% for the period.

Woolworths says earnings per share for the 26 weeks to December were expected to be 20% lower than in the matching period in 2016. Headline earnings per share were seen falling as much as 17.5% to between 200.1 cents and 212.3 cents. The retailer adds that the drop in earnings is

After more than 30 years with Franklin Templeton Investments, Mark Mobius, Ph.D. retired from the company at the end of last month. The company’s Chairman and CEO Greg Johnson said: “There is no single individual who is more synonymous with emerging markets investing than Mark Mobius. My colleagues and I are deeply grateful to have had the opportunity to work alongside a legend, and we thank Mark for his many years of dedicated service and tremendous contributions to the firm.” The Board of MMI Holdings has announced that Nicolaas Kruger will be stepping down as CEO with effect from 15 February 2018. “This decision comes after a few months of discussions between Nicolaas and the MMI Holdings Board that enabled the Board to consider the appointment of his successor with due care,” the Board said. It added that Hillie Meyer has agreed to join MMI on a threeyear contract as CEO of MMI Holdings. Meyer served as the CEO of Momentum from 1996 to 2005. To further strengthen the management team the Board said that Jeanette Marais will join the group as a second Deputy CEO. Her appointment is effective 1 March 2018. (Jeanette was previously an executive director at Allan Gray). Mary Vilakazi was appointed as Deputy CEO in July 2017. “Mary’s current focus as Deputy CEO is, and remains, to extract additional value by operationally integrating the group’s two retail operations, Momentum and Metropolitan,” the Board added. A cryptocurrency app is to be launched by independent financial services organisation, deVere Group, due to “soaring global demand” and in defiance of financial traditionalists. deVere Crypto is the deVere Group’s second major fintech offering in less than 12 months. deVere Group’s founder and CEO, Nigel Green, comments: “2017 saw the true dawn of the financial technology era. Fintech is already fundamentally changing the way we access, manage and use money – and the changes are coming quicker than ever before, due to improving technologies and growing demand.”

UPS & DOWNS The Clicks chain says it increased sales by 14.2% in the 20 weeks to 14 January 2018 as the brand continued to show its resilience in the current tight consumer spending environment. Clicks reported comparable store sales growth of 7.5% and showed real volume growth of 4.8% as selling price inflation measured 2.7%. Total group retail sales increased by 13.0% and by 6.7% on a comparable store basis, with selling price inflation of 3.0%. UPD, the group’s

Bank Zero has been granted a provisional licence after a rigorous in-depth evaluation process by the South African Reserve Bank. The 45% black-owned bank is set to launch in the fourth quarter of 2018. Bank Zero says it will make use of a mutual bank licence. Founded by tech entrepreneur Michael Jordaan and banking innovator Yatin Narsai, Bank Zero will offer “a unique and fresh approach to banking without any legacy systems which can be costly to maintain.”

due to the inclusion in the prior period of the profit on the disposal of the David Jones’s Market Street property in Sydney, as well as the effect of a potential reassessment of the carrying value of David Jones assets.


28 February 2018

NEWS & OPINION

5

Foreign estates need careful planning

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ith the relaxation of South African foreign exchange controls and more investors seeking to diversify risk, many are creating offshore estates. “People often don’t think about what the offshore probate formalities might be, what the death duties position might be, and what other effects the death of the investor will bring about,” says David Knott, fiduciary expert at Private Client Trust, a division of Private Client Holdings. He adds that in many instances, a South African Will would be acceptable and recognised in that foreign jurisdiction, provided of course it complies with South African formalities.

One ‘world-wide Will’ or separate wills for each jurisdiction? However, according to Knott, whether there are forced heirs or not, obtaining the necessary local documents in a manner acceptable to the foreign probate office could take up some time, for example translations may be required and for this reason many would rather execute a separate Will in the foreign jurisdiction. “One would need to identify an acceptable foreign executor to draft the offshore Will to ensure that all necessary requirements are met. Care must also be taken that the local Will and the foreign Will do not revoke each other and it is clear which estates must be dealt with in terms of that particular Will.” Generally, an offshore estate would be liable for estate duty in South Africa and may also attract some death duties abroad, depending on the amount. “We have tax treaties with many countries to ensure that assets are not taxed twice, and the local tax authority would allow a credit here against any foreign tax paid in terms of the treaty.

“If you might have been born or lived in the foreign country where investments are held, the foreign tax authority might be keen to deem you still domiciled in that country and so claim death duties on your worldwide estate. “Should this apply, it would be prudent for you to execute a declaration of domicile confirming when you gave up your domicile of birth and acquired a domicile of choice in South Africa to avoid this argument later.” Knott says that whilst fiduciary experts cannot be expected to be familiar with the probate requirements in every jurisdiction world-wide, it is still extremely prudent to contract the services of such a specialist who at least knows when to anticipate problems and also who one needs to consult with.

David Knott, Fiduciary Expert, Private Client Trust

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Forced heirship and the rules in other countries “The local executor, once appointed, would then need to appoint an agent in the foreign jurisdiction to deal with the foreign estate and effect a distribution to the heirs. A single world-wide Will is workable in many instances where there are no forced heirship rules in place,” he explains.

There are no such rules in the common offshore havens such as Jersey, Guernsey or the Isle of Man. However, due advice and caution must be taken where forced heirship rules apply, for example in Scotland or in many European countries. In France, the freedom to dispose of assets is restricted if the deceased is survived by either descendants or ascendants. Descendants are preferred over ascendants and interestingly, a spouse is not regarded as a forced heir. “If the deceased is survived by one child, that child must receive at least one half of the estate; where two children survive they must share equally two-thirds of the estate and if three or more children survive they must share equally three-quarters of the estate,” Knott says. Several jurisdictions demand that any fixed property (in that country) can only devolve under descendants and failing them, ascendants and only if there are none, upon remoter beneficiaries. Matters complicate considerably once an estate is held in an Islamic country.

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1866_Swan Lake_SA_155x220.indd 1

Margot Fonteyn is regarded as one of the greatest Margot Fonteyn, regarded as one of the greatest ballerinas of all time. By the time she was twenty ballerinas of all time, was twenty years old when she years old, she had performed Swan Lake as the performed Swan Lake as the prima ballerina. For her prima ballerina. For her it was a lifetime of sore it was a lifetime of, sore feet, straight backs and lifted feet, straight backs and lifted chins. Sticking to a chins. Sticking to a goal, day in and day out. At Allan goal, day in and day out. At Allan Gray we value Gray we value this kind of commitment. It’s the same this kind of commitment. It’s the same philosophy philosophy we apply to investing and it has worked we apply to investing and it has worked well for well for our clients for 42 years. our clients for 43 years. Call Allan 0860 654 or 654 youror financial adviser, CallGray Allanon Gray on000 0860 000 your financial or visitadviser, www.allangray.co.za or visit www.allangray.co.za

2018/02/02 9:39 AM


6

NEWS & OPINION

DES LEATT Compli-Serve SA

T

28 February 2018

Key considerations in terms of Fit & Proper Regulations

he final version of the Fit & Proper Regulations was released on 15 December last year. Financial soundness as it impacts juristic representatives is among the key changes FSPs face. Along with the implementation of a governance framework that sets out standards including how to deal with the outsourcing of functions to a person who is not a representative of the FSP – the checklist to being compliant with Fit & Proper is becoming more onerous. Financial soundness For an FSP and any of its juristic representatives to be considered financially sound, assets must at all times exceed liabilities. An FSP, other than Category 1 that does not hold or receive monies, and a juristic representative of such an FSP must have effective, comprehensive strategies and systems to cover the nature and level or risks involved, including the risk that they might not be able to meet the financial soundness obligations in the future. No person may become an FSP or a juristic representative if business rescue proceedings have commenced. A person authorised as an FSP, or appointed as a representative under more than one category of FSP, must comply with the most onerous of the financial soundness requirements. Implementation of the additional requirements for juristic representative is 1 March 2019. Governance framework An FSP must adopt, document and implement an effective governance framework that provides for the prudent management and oversight of the financial services it provides to ensure fair treatment of clients.

Your governance framework must: • Be proportionate to the nature, scale, complexity and risks of the business • Provide for the development, implementation and oversight of fair treatment policies, and prudent management and oversight of the business of the FSP • Include a business plan setting out the aims and scope of the FSP, the business strategies and related matters • Provide for sound and sustainable remuneration policies and practices that promote alignment of the FSP with its clients • Provide for corrective actions required in respect of non-compliance or weak oversight • Include effective systems of corporate governance, risk management, contingency planning and internal controls. Robo-advice compliance Many FSPs are now able to offer ‘automated advice’ or robo-advice, which is the furnishing of advice through an electronic medium that uses algorithms and technology without the direct involvement of a natural person. Additional operational requirements come in to play. They include provision for human resources and capabilities, policies and procedures, monitoring and testing algorithms and filters, as well as adequate and sufficient technology. Outsourcing We now have very clear guidelines that apply when an FSP outsources functions to a person who is not a representative of the FSP. An FSP must exercise due skill, care and diligence, when entering into, selecting, managing or terminating

any arrangement for the outsourcing of its functions, when that function is: • A function prescribed to be performed by the FAIS Act or another law • A function that is integral to the nature of the authorised financial services of the FSP • Of material importance to the operation of the FSP.

FINANCIAL SOUNDNESS AS IT IMPACTS JURISTIC REPRESENTATIVES IS AMONG THE KEY CHANGES FSPS FACE It is essential to ensure that the person to whom the function has been outsourced, has the required ability, capacity and legal authorisation to perform the outsourced functions, and most importantly, is able to carry out the agreed services effectively. Any remuneration or fee paid must be reasonable and commensurate, as well as not structured that it may increase the risk of unfair treatment of clients. An FSP must have contingency plans to ensure that it continues to function and provide service to clients should the outsourced service be terminated, or if it becomes ineffective. Further, outsourced individuals may not be permitted to outsource or sub-delegate any activity or part thereof relating to the tasks performed on behalf of the FSP. As many facets influence the ability to stay compliant, seeking the assistance of a compliance professional could go a long way into ensuring you stay safely on course and properly fit.

How to make the tax act work for you

S

outh Africa has a highly favourable tax environment for investors but a good awareness of the legislation is required in order to make the Tax Act work for you. Neill Hobbs, Co-founder and Director of Anuva Investments highlights a few key pieces of legislation that investors should consider: • Foreign pensions: Any pension (government or non-government) accumulated for services rendered outside of South Africa will not be subject to tax in this country. This also relates to any lump sum, pension or annuity received by or accrued to a South African resident from a source outside of South Africa as consideration of past employment outside the country. Considering the growing number of corporate nomads who work in different jurisdictions, this is an important piece of legislation. 

• Retirement annuities (RAs): RA contributions are tax-deductible and according to the Tax Act, investors can deduct up to 27.5% of their gross remuneration or taxable income (whichever is higher) in respect of total contributions to a pension, provident or RA fund. This is subject to an annual cap of R350 000 per tax year.  • Donations to Public Benefit Organisations (PBOs): A PBO is an entity that is created to carry out some form of public benefit activity, such as a trust or a not-forprofit organisation. PBOs that are registered and are able to provide you with an 18A certificate will allow you to deduct your donations made from your taxable income. Your deduction is capped at 10% of your taxable income. • Capital allowances and recoupments eg wear and tear: A commonly used tax allowance for

property investors is the ‘wear and tear’ allowance against the more standard assets such as furniture. In terms of furniture, a taxpayer may deduct 20% of the cost of the asset per year against income until the full cost of the asset has been claimed, adding up to five years. • Tax-Free Savings Accounts: In March 2015, National Treasury introduced a tax-free investment product to encourage after-tax saving amongst South Africans. Contributions to the tax-free savings account are limited to R33 000 per individual per year, which works out to a monthly contribution of R2 500. A lifetime contribution limit of R500 000 applies, which in today’s value equates to just under 17 years. • Section 12J: For less risk-averse investors, or investors who have reached the cap on their Retirement Annuity, Pension Fund and TaxFree Savings Account contributions,

a Section 12J Investment is a tool to maximise your tax deductions. Section 12J allows taxpayers a 100% tax deduction in the year of investment if they invest in SMMEs by way of subscription of shares in a Section 12J Venture Capital Company. Hobbs advises investors to ensure effective structuring across all entities – in your individual capacity, company capacity and trust capacity. This will assist in using all the allowances and deductions available to you effectively and synergistically across the different entities. 

Neill Hobbs, Co-founder and Director of Anuva Investments


28 February 2018

Investment Forum 2018 to provide important insights

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n impressive line-up of speakers will present the latest thinking in the asset management industry at the Investment Forum 2018, to be held next month at Sun City and in Cape Town. A total of 19 asset managers are set to take part in seven panel discussions and deliver 34 tailored presentations, enabling advisers to select the topics that will be of most value to them in constructing their portfolios. Duncan Artus of Allan Gray argues for active investing regardless of the market cycle, while Coreshares’ Gareth Stobie counters with the merits of passives in portfolio construction. Coronation’s Neil Padoa, Charlotte Solomon of Black Rock and Mark Laurence of Fundsmith, debate the value of their investment approaches and discuss how they are deploying capital at the moment, while Absa’s Kurt Benn, Nedgroup’s Omri Thomas and Paul Bosman of PSG, provide insight on how and why SA balanced funds have generally underperformed their targets over the last two years. While the ANC elective conference took place in December last year and a new party

president was elected, uncertainty still prevails around this country’s policies. Coronation’s Sarah-Jane Alexander, Old Mutual’s Peter Linley and Rob Spanjaard of Rezco ask whether this has created a buying opportunity or if it’s still risk-off for South Africa. Allan Gray’s Andrew Lapping explores why incentives and the truth matter in investing and Johnny Lambridis of Prudential asks if passive investing is the answer to both advisers’ and clients’ needs. Investec’s Clyde Rossouw looks at dealing with short-term uncertainty by diversifying and avoiding the herd, while Neville Chester of Coronation discusses how to manage uncertainty by constructing portfolios that do well under different scenarios. A panel including Clyde Rossouw of Investec, Dan Brocklebank of Orbis and Schroders’ Kevin Murphy will discuss EMs, FAANGs and Brexit – as well as how to diversify strategically and hedge to safety. The Investment Forum 2018 promises to be one of the top events on this year’s investment conference calendar and a not-to-be missed opportunity to catch up on the latest trends in the asset management space.

NEWS & OPINION

Ecsponent recognised as FPI Corporate Partner The Financial Planning Institute of Southern Africa (FPI) is pleased to announce that Ecsponent is now an FPI Corporate Partner™, through its subsidiary, Ecsponent Financial Services. For existing and potential customers, doing business with a FPI Corporate Partner™ means they have the assurance they are dealing with an organisation that adheres to the highest professional and ethical standards in the financial services industry, and that planners and advisers operate at high competency levels that exceed the requirements set out by the regulator.  “We are proud to be recognised by the Financial Planning Institute as an FPI Corporate Partner™, through our subsidiary Ecsponent Financial Services. As a listed African financial services group, striving to maintain the highest professional standards, ethics and integrity is paramount in our operations. Therefore, the FPI mission, to advance and develop financial planning professionals, is perfectly aligned with the Ecsponent Group’s vision of becoming the investment destination of choice in its chosen markets”, says Terence Gregory, Ecsponent Group CEO.  Gregory adds: “To achieve our mission, we strive to offer the gold-standard in financial advice resulting in wealth generation for our clients. By partnering with the FPI, we are assured of a true measure of professional competency against which to benchmark ourselves.”  The FPI Corporate Partner™ agreement has been established to raise the competency levels of financial planners and advisers through various up-skilling initiatives. The up-skilling process provides financial planners with pathways towards the Financial Services Advisor™ and Certified Financial Planner® certification programmes, professional designations awarded to financial planners and advisers who have met the rigorous certification standards of education, examination, experience and ethics requirements.  Commenting on Ecsponent’s recognition, Godfrey Nti, FPI CEO says: “We welcome Ecsponent as an FPI Corporate Partner™ company. There is good synergy between the two organisations in terms of providing and ensuring professional financial planning. We look forward to working with Ecsponent and developing a mutually beneficial relationship.”

7


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INVESTING

10

INVESTING

28 February 2018

INSIDER CHRONICLES

SA investment into UK commercial property increases

ADRIAN MEAGER General Manager Warwick Asset Management

Asset allocation and diversification

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sset allocation involves dividing your investment portfolio among the different asset classes, such as shares, bonds, listed property, and cash. The process of deciding which mix of assets to hold in your portfolio is dependent on your personal circumstances. Risk and reward are inextricably entwined. You have heard the phrase ‘no pain, no gain”; this phrase can explain the relationship between risk and reward. All investments involve some degree of risk and if you intend to invest in shares, bonds, or unit trust funds it is important to understand that you could lose some of your money. The reward for taking on risk has the potential for greater investment returns. If you have a financial goal with a long-time horizon, you are likely to make more money by carefully investing in asset classes with greater risk, like shares and listed property, rather than restricting your investments to assets with less risk, like cash. On the other hand, investing solely in cash may be appropriate for your short-term financial goals. Shares, bonds, listed property, and cash are the four most common asset classes. But there are other asset classes available, for example, physical property, precious metals and commodities, private equity, and blockchain technology. Some investors may want to include these asset classes in their portfolios; however, investments in these asset classes typically have category-specific risks. By including asset classes with investment returns that move up and down under different market conditions, an investor can protect against significant losses. Historically, the returns of the four major asset classes have not moved up and down at the same time. By investing in more than one asset

class, you reduce the risk that you will lose money and your portfolio’s overall investment returns will have a smoother ride. A portfolio should be diversified at two levels: between asset classes and within asset classes. So, in addition to distributing your investments among shares, bonds, listed property, cash equivalents, and possibly other asset classes, you will need to spread out your investments within each asset class. The key is to find investments in segments of each asset class that may perform differently under different market conditions. One way of diversifying your investments within an asset class is to find and invest in a wider range of companies and industry sectors. An investment portfolio which invests in only four or five individual shares will not be diversified. Your portfolio would need at least 15 to 18 carefully selected individual shares to be properly diversified. An investor may prefer to diversify within each asset class through the ownership of units in unit trust funds, rather than through the ownership of individual shares, bonds, etc. Unit trust funds make it simpler for investors to own a small part of many investments. Be aware, however, that an investment in a unit trust fund does not necessarily give instant diversification, especially if the fund focuses on only one particular industry sector. If you invest in narrowly-focused unit trust funds, you may need to invest in more than one fund to get the diversification you seek. To diversify within an asset class, you may consider investing in funds with a larger company focus as well as some small companies and international shares or funds. Diversifying between asset classes may mean investing in equity funds, bond funds, listed property funds, and money market funds.

Investment into UK commercial property from South African capital increased 49% year-on-year to hit a record £288m in 2017, according to data from Real Capital Analytics (RCA), analysed by international real estate adviser Savills. South African investors have rapidly increased their presence in the UK commercial market over recent years, jumping 677% from three deals totalling £37m in 2014 to £288m over 24 deals in 2017. Office assets dominated transaction volumes in 2017, accounting for 36% (£104m) across three deals. Savills notes that the acquisition of self-storage group Storage King, with 13 properties across the UK, by the South African Stor-Age Property REIT boosted total figures for the year. Richard Merryweather, Joint Head of Investment at Savills, comments: “South African investment into UK commercial property increased significantly in 2017 as investors looked to shore up capital. The regional market has been particularly attractive with the group as it provides rental growth and asset management opportunities. Last year non-domestic investors accounted for almost half of the UK deal count with yields looking healthy in comparison to Asian and European markets.” The year 2017 saw significant investment into UK hotels from South African capital according to the RCA data, reaching £16.2m – up from £1.9m in 2015, following no activity in 2016. There has been a particular focus on the regional markets with acquisitions including three south west hotels for £12.5m by Fairtree Capital. The acquisition of the 2 880m2) 55 Newman Street office building in London by the Leeu Collection is earmarked for redevelopment into the group’s first London hotel. Mark Latham, MD of Pam Golding Commercial Africa, Savills’ international associates in Sub-Saharan Africa, says interest in UK commercial property is across the board, including the office, industrial and hotel sectors. “In addition, we are also currently seeing interest in retail and student housing. While typically, interest has been predominantly in London, we note that the regional markets are becoming more popular due to the premium pricing in London and better value being sought and offered in the regional markets.”


INVESTING 11

28 February 2018

KIM JOHNSON Investment Analyst, Old Mutual Wealth Tailored Fund Portfolios

What to consider when building a model portfolio financial institution with a proven track record of delivering on client outcomes. This will provide peace of mind that return objectives specified will likely be delivered.

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inancial planners with a FAIS (Financial Advisory and Intermediary Services) Category 1 licence are responsible for their advice process and are required to recommend suitable investment options for each investor. However, with as many as 1 500 South African unit trust funds registered with the Financial Services Board (FSB), identifying which funds are viable requires thorough quantitative and qualitative research to be done by financial planners. This takes valuable time away from servicing clients and addressing their specific financial needs. This has resulted in a growing trend of financial planners moving away from traditional fund selection – opting instead for the use of Discretionary Fund Managers (DFMs), who, in collaboration with the financial planner, are responsible for building and managing tailormade model portfolios aimed at achieving clients’ specific financial goals.  While the use of model portfolios potentially offers financial planners some benefits – such as improved client outcomes, detailed investment reviews, simplified administration and greater ease of administration – it’s vital that the performance of the model portfolio aligns to the client’s risk and return objectives. As such, the following considerations need to be taken into account when building a model portfolio. Track record of the investment team Experience and expertise of the investment team is crucial. In order for a financial planner to feel comfortable that they will successfully deliver on their clients’ return objectives, the DFM selected must have a good track record of consistently being able to deliver on return objectives. They also need access to an experienced team of investment specialists that has proven skills and expertise in asset allocation and manager selection to support the model portfolio approach. In making this assessment, it gives additional comfort if the DFM has the backing of a strong investment team or is linked to a reputable

Risk and return considerations The advice and investment process should be aligned so that the investment strategies implemented by the financial planner for their client meet the objectives of their financial plans. The primary objective of IT’S VITAL any financial planner is to keep clients’ money THAT THE safely invested and to PERFORMANCE grow capital over time OF THE MODEL and, as such, every decision made in the PORTFOLIO investment strategy ALIGNS TO THE should be aimed at CLIENT’S RISK achieving the best possible outcome AND RETURN for every client. This OBJECTIVES implies that the DFM should understand how investment risk is measured and managed on behalf of clients. Fees When building a model portfolio, fees can be an additional layer that could erode returns and affect the client outcome. In any investment environment, controlling costs is imperative, as the cumulative effect on the client’s investment target becomes more material, with high investment fees threatening the probability of achieving the client’s return objectives. Many DFMs blend multi-asset class funds within their model portfolios. Combining multiasset retail class funds can be an expensive way to diversify the investment risks on behalf of clients. Through the use of specialist asset class building blocks, a DFM can control the asset allocation and, by design, manage the investment return objective. In addition, many retail funds charge an uncapped performance fee. This leads to less certainty around the overall cost of the solution and adds further uncertainty as to whether the client will reach their return objective. Model portfolios built using a flat fee structure therefore allow for more certainty and control over the costs of the solution. Costs can be controlled even further through the building block approach. By incorporating asset class specific passive funds, model portfolios

can further reduce overall costs of the portfolio solutions and manage the active risk taken by asset managers effectively. We believe that active and passive management styles complement each other well in a well-crafted investment strategy. Fund selection Too often, advisers favour big brands and yesterday’s winners without applying the sufficient amount of research required. It is crucial to blend suitable fund managers together and ensure that instead of basing fund selection decisions on past performance, you select the winners of the future. This is not an easy undertaking, but by avoiding single managers that take extreme risks, a DFM can add value by avoiding adverse manager outcomes. To match investment risk to a client objective, control of the asset allocation is key. Balanced funds can vary from high to low equity exposure even within a single unit trust category, with asset managers often making large changes to asset allocation. Balanced retail funds tend to have high investment fees, and often have a performance fee component, in many cases uncapped, leading to high and varied total investment costs.  Furthermore, as fund managers are only required to make their holdings available in arrears, this results in the DFM and planner making decisions based on stale information and therefore not being able to make timeous and accurate decisions, if they wish to be actively involved in the process.   Asset allocation Portfolios are usually linked to a specific, expected real return and a minimum investment period. To create a portfolio, suitable asset classes must be selected, and a long-term strategic asset allocation should be developed.  Your DFM of choice should have a way of developing the appropriate strategic asset allocation for any given real return objective. This process should involve selecting suitable asset classes and developing the long-term strategic asset allocation required for each investment strategy to achieve its targeted return.  Tactical asset allocation may be employed through taking underweight and overweight positions in specific asset classes around their strategic target weights. This way of tactical asset allocation can reduce investment risk and enhance returns if performed skilfully. Only well-resourced DFMs are able to combine fundamental valuation research with economic insights to derive suitable tactical weights for your portfolios in an everchanging environment.  With all the aforementioned considerations to take into account, financial planners are increasingly seeing the benefit of partnering with a skilled DFM in order to enhance their service to clients. When a DFM is focused on ensuring that clients meet their planning objectives, it is also contributing to the sustainability and attractiveness of the advice practice.


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INVESTING

28 February 2018

KIM HUBNER Business Development and Marketing, Laurium Capital

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avvy investors typically cover three things in any due diligence or when evaluating a manager or fund – people, process, and performance. The last one, performance, is captured in the track record of the funds managed by the fund manager. After many years working for asset management companies, I have learnt that there is a magic number: three years. Many financial advisers, discretionary fund managers and multi-managers will only allocate to funds which have at least a three-year track record. Some linked investment platforms (LISPs) will only consider your fund for shelf space or their buy lists once this magic number is reached. Companies that rate funds and do the calculations for the annual coveted awards in the industry often require a minimum track record of three years. Of course, a five-year or ten-year track is even better. This makes it quite tough for new entrants in the market to get traction in terms of assets. However, investors who have faith in the other two Ps, people and process, without the performance track record, are often the beneficiaries of excellent performance as funds frequently do exceptionally well in the first few years of existence for a number of reasons, being small and nimble being one of them. So why the obsession with three, five and ten-year track records? The important objective is to differentiate investment skill from luck, and to identify which funds

PHILIP BRADFORD Head of Investments, Sasfin Wealth

“Those that don’t know history are doomed to repeat it” – Edmund Burke We have been living in fear of a downgrade to ‘junk status’ since ‘Nenegate’ in December 2015. The threat of political interference with the state purse saw local and foreign investors head for the door, resulting in a vicious sell-off of the rand and South African bonds. To put things in perspective, the fall in our bonds was much worse than what occurred during the global financial crisis in 2008. The ratings agencies, however, took a more measured approach and only started downgrading our debt ratings a few months later, most notably after Pravin Gordhan was fired. Both our foreign currency and local currency bonds remain investment grade for now, albeit by the skin of our teeth. All it takes now is for Moody’s to downgrade our local currency credit by one notch and we will fall into junk status. The great fear is that if this happens,

How relevant is a track record? have the greatest likelihood of future success. A longer track record gives a more accurate indication of a fund’s true risk profile and permits investors to evaluate the performance of a fund through a complete market cycle. Longer track records allow for the effects of a manager’s particular investment style, that may produce better results in some market conditions than others. Over the short-term, these differences in style may create a distorted impression of overall performance, but over the long-term, differences in fund performance attributable to the manager’s style are far less significant. Using a longer term track record enables fund evaluators to assess managerial skill through differing market cycles, and results in an evaluation that should separate luck from skill. Laurium Capital has its fair share of ‘magic’ numbers to celebrate this year. • Ten years: At the end of July, Laurium Capital will have a ten year track record. The first fund launched was the Laurium Long Short Fund, started on 1 August 2008. This fund has delivered 11.5% per annum since inception to end December 2017, which is in line with the All Share, but with half the risk. • Five years: Laurium moved into the long only space with the launch of the Laurium Flexible Prescient Fund on 1 February 2013, that celebrates its 5th anniversary on 31 January this year. Since inception to 31 December 2017, the Fund has an annualised

return of 15.5% vs FTSE/All Share TR Index of 11.4% and is ranked no. 1/46 funds in the South African Multi Asset Flexible Category over this time. • Three years: The Laurium Balanced Prescient Fund will turn three in December this year. It is off to a good start, with an annualised return of 10.4% since inception on 9 December 2015 vs Multi-Asset High-Equity peers of 6.3%, ranking 8/140 in this competitive category. Delivering excellent long-term performance In summary, to deliver excellent long-term performance, we believe a manager needs to stick to an investment philosophy, have a disciplined investment process and attract and retain a skilled, experienced team. If the investment team are constantly changing, it is impossible to say with any certainty who is responsible for the fund’s track record. Discipline means that the portfolio manager’s investment approach is applied consistently through varying economic and market conditions. Laurium is an authorised financial services provider (FSP No 34142).Collective Investment Schemes in Securities (CIS) should be considered as medium to long-term investments. The value may go up as well as down and past performance is not necessarily a guide to future performance. Prescient Management Company (RF) (Pty) Ltd is registered and approved under the Collective Investment Schemes Control Act (No.45 of 2002). For any additional information such as fund prices, fees, brochures, minimum disclosure documents and application forms please go to www.lauriumcapital.com.

The anatomy of a downgrade – life after junk South Africa will be kicked out of the World Government Bond Index and many global asset managers will potentially be forced to sell about R80bn of our bonds.

The immediate implications A downgrade to junk status will definitely be bad for our economy. There is a high probability that we could fall back into recession. However, as investment managers, we should be more concerned about how it will impact our investors’ capital, in particular their investments in rand and our South African bonds. In order to do this, a few questions need to be answered: • What can we expect if we get downgraded further? • Will the sell-off be as bad as December 2015? • How much of our bonds will automatically be sold? • Can South Africa recover from this? • How much of this has already been factored into prices?

To answer these questions it is insightful to study what happened to other emerging market countries that have been downgraded to junk status in recent history. Brazil, Hungary and Russia are good examples. Brazil in particular has similar problems to South Africa in terms of their political upheaval, huge inequality, high levels of corruption and fiscal and economic problems. All of these countries still wear the mantle of ‘junk’ and have endured what potentially awaits South Africa. Interestingly in all three instances, after initial periods of weakness, their bonds and currencies were stronger six and 12 months after falling into junk status. This is not unusual given that the bond market is very much forward looking and therefore often referred to as the ‘clever market’. This also obeys the old market adage: “Sell on rumour, buy on fact.” Therefore it is quite possible that if South Africa’s local bonds are

downgraded to junk status, after a period of initial weakness, the rand and bonds could recover to levels before the downgrade. Importantly, issues like this should not be assessed in isolation. It is crucial to understand what the global sentiment is at the time. If the mood is positive towards emerging markets it is quite possible that the market reaction will be muted and shortlived. This would mean a moderate sell-off followed by a steady correction. However, if the trend is negative, market reaction would probably be severe.


28 February 2018

OFFSHORE IN VESTING

INVESTING 13

Timing the market is a fool’s game

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ome global equity markets hit record highs late last year, and as a result, many investors are now concerned that these all-time highs could mean a potential pullback in the near-term. Yet, as experts always warn, timing a pullback could be costly – and quitting the stock market is not a solution. Presently, markets are not showing signs of risk to warrant a correction and there are many reasons for optimism throughout 2018. Inevitably, there will be risks – and one of these is the reversal of quantitative easing (QE) in the US. Quantitative easing As Michael Hasenstab, Chief Investment Officer at Templeton Global Macro points out, financial markets have surfed a wave of low-cost money in the US, courtesy of the US Federal Reserve’s massive QE programmes that were launched after the global financial crisis of 2007-2009. “The expansion of the Fed’s balance sheet from around US$900 billion in 2008 to nearly US$4.5 trillion today has arguably been the most dominant force shaping global financial markets,” he says. “QE has driven down yields and pushed up asset prices, steering many investors toward riskier assets while keeping the costs of capital artificially suppressed. This has distorted valuations in bonds and in equities. In short, the era of QE has created a seemingly complacent market that views persistently low yields as a permanent condition.” Hasenstab adds that this is neither normal nor permanent, “and we expect the reversal of QE by the Fed to meaningfully impact financial markets in 2018 and beyond.” A slow rise in interest rates is expected, over the year, along with a continued unwinding of the Fed’s massive balance sheet as the economic recovery continues and the labour market remains relatively tight. In Europe, policy is likely to tighten more gradually as the recovery builds steam and inflationary pressures remain subdued. “Although the effects of these moves will bear watching, we would point out that central bank-driven liquidity remains significant and should continue to buttress global growth,” says Stephen H Dover, Head of Equities at Franklin Templeton Investments . “The balance sheets at the ECB and BOJ are bigger than the Fed’s as a

percentage of gross domestic product (GDP) and should continue to support global equities. So, as long as rate hikes and policy changes are gradual and well communicated, we believe markets can take the moves in their stride.” Dover adds that even emerging markets need not necessarily fear tighter Fed policy and a potentially stronger US dollar – as long as the dollar moves steadily. “We believe the positive economic forces currently present in the global economy will remain strong enough

and Chief Executive at deVere Group. “At the same time, an increased focus on state control of the economy risks damaging entrepreneurial confidence. A slow-down in China’s growth would trigger a deceleration in global demand and re-awaken fears of global deflation.”  Unsurprisingly, investors remain concerned about the outlook for global market returns and dividends. Structural growth “Against this uncertain backdrop, and as we look forward to the rest of 2018,

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to overcome the potentially negative impact tighter policy will have, but we could see some short-term volatility as markets adjust.” China Another key risk is China’s economy that is aiming to tackle problems that include domestic debt, poverty and pollution. Many analysts are predicting that expansion will slow to 6.5% during the year, the slowest rate since 1990. “As President Xi Jinping reorientates the economy away from a focus on rapid growth dominated by infrastructure investment and exports, towards services and household consumption, the government could become less willing to prop up failing industries and bankroll leveraged investors,” says Nigel Green, Founder

we believe a focus on structural rather than cyclical growth will be key,” says Clyde Rossouw, Co-Head of Quality and Manager of the Investec Global Franchise Fund, Investec Asset Management. “One cannot rely solely on the fortunes of exogenous factors such as commodity prices, interest rates, or the economy to sustain growth.  “As has been the case in 2017, particularly in the technology sector, we expect the market to again reward quality companies that prove their ability to deliver sustainable growth in earnings and cash flows, and punish companies across the market whose earnings disappoint.”  Rossouw, however, remains mindful of the threats that also exist to the future growth of quality companies.

“For example in consumer staples, disruption from the ‘infinite shelf ’ of e-commerce is lowering barriers to entry and supporting smaller brand and private label penetration, thereby increasing fragmentation across categories. “However, the impact of this and other trends will not be felt evenly across companies. In many cases it will likely provide opportunities as well as risks. Careful stock selection will be required.” He points out that equity markets have re-rated significantly since the global financial crisis and are no longer cheap. “In the context of a lowgrowth, low-return world, however, we do not believe that the valuations of quality stocks are overly stretched. Relative to longer-term history, we believe the valuations of quality stocks remain attractive, given the quality and growth characteristics one is paying for and the valuations of bonds and other assets. Again, however, stock selection will be key.”  In 2017, investors were rewarded for successfully picking stocks that delivered growth. “However, perhaps more important to investment performance in 2018, will be avoiding the losers rather than picking the winners. This will require careful management of downside risk, including both business and valuation risk. Again, active stock selection will be critical,” Rossouw adds.  Overall, while more economically sensitive sectors with global exposure, such as energy and mining, have rallied recently, the sustainability of this rally is uncertain. “We believe that carefully selected quality companies, with long-term structural rather than short-term cyclical growth drivers, should be well placed to perform well in 2018.  “We will continue to focus on finding these attractively valued quality companies, with demonstrably enduring competitive advantages that are able to continue to grow their cash flows into 2018 and beyond.” No one can accurately predict what lies ahead, but one message, says deVere’s Green, should be clear: “Keep on investing. Why? Because economic history shows that over time, markets go up.” The fact is that time in the market always beats trying to time the market hands down.


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INVESTING

E XCH A NGE T R A DED PRODUCTS

28 February 2018

Rise in size of ETP industry ‘most encouraging’

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ccording to data from etfSA.co.za, the total market capitalisation of the 82 ETFs/ETNs, listed on the JSE, as at 31 December 2017, was R85 bn. This constituted an increase of 14.7% on the market capitalisation of all ETPs at the end of 2016. “Following three years of relative stagnation, between 2014 and 2016, when the total market capitalisation of the ETPs listed on the JSE remained pegged below R80 bn, the rise in the size of the industry in 2017 was most encouraging,” Mike Brown, Managing Director at etfSA. co.za says. “The number of ETPs in issue also rose from 73 at the end of 2016 to 82 at the end of 2017.” Brown adds that 2017 turned out to be a year when the main market indices performed well, both locally and abroad, making it very hard for active investment managers to outperform such indices. “With over 80 ETPs now listed on the JSE, the choice of listed securities giving access to such indices allows the passive investment manager to construct multiasset balanced investment portfolios using ETPs, which have investment returns and cost structures very competitive to the traditional active investment managers, who rely more on individual stock picking and factor allocation for investment returns.” A continuation of new listings of ETPs this year seems likely, as most current issuers are looking to add to their product range, Brown adds. “Some new issuers are also reported to be looking at listing ETPs on the JSE and the current trend towards greater product choice and product innovation looks likely to continue.”

THE CURRENT TREND TOWARDS GREATER PRODUCT CHOICE AND PRODUCT INNOVATION LOOKS LIKELY TO CONTINUE

“We would expect to see further developments in the smart beta ETP area, including multi-factor securities, as well as a growing number of ETFs, giving access to global markets and assets,” he says. S&P DJI, together with CoreShares, has launched the S&P Global Dividend Aristocrats Blend Index. According to Mxolisi Siwundla, Investor Relations and Product Analyst at Coreshares,

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the S&P Dividend Aristocrats Index Family aims at providing Investors with access to what are termed ‘Cash Cow’ companies. In 1970, the Boston Consulting Group introduced the concept of a ‘Cash Cow’ as part of its growth share matrix. A ‘Cash Cow’ is a metaphor for a dairy cow that reliably produces milk over its life. After the initial capital outlay, the cow continues to produce milk for many years to come. “This strategy has been successful as it is based on a simple, intuitive and timeless investment strategy of selecting companies with a strong track record of growing dividends. ETFs globally following this strategy have raised over R300 bn in assets,” Siwundla adds.

Investors who select the S&P Global Dividend Aristocrats Blend Index would do so to seek the following characteristics: • Quality companies that are defensive in nature – Dividend Aristocrats tend to be companies that endure difficult market and economic environments relatively well as they usually have less cyclical earnings and are cash generative. The persistent annual growth in their dividends suggests good financial strength, lower levels of debt and a disciplined management team. A good example of one such company that will be in the index is McDonald’s. The company has consistently grown their dividend since 1977.

• Relative stability in volatile markets – Although still an equity strategy and therefore risky by nature, the strategy should provide better protection to investors relative to Market Cap weighted indexes. Not only does the index achieve a higher riskadjusted return, but it also captures more of the upside than it does its downside. • Global diversification across regions and constituents – The index is invested in more than 275 shares across 24 countries. The geographical allocation of the countries will match their respective allocations in the S&P Global Broad Market Index. The index is well diversified with no excessive exposure to any single stock. The Top 20 shares currently only make up 20.5% of the fund. The largest region in the index is the S&P 500 Dividend Aristocrats Index based in the USA, which accounts for 51% of the fund. This index is also the longest live track record going back to May 2005. The S&P 500 version has produced enhanced risk adjusted returns and improved risk management. According to Siwundla, such an index strategy is well suited for those clients who wish to diversify into a select group of global ‘Cash Cow’ companies. “These quality companies have a strong track record of delivering consistent and growing dividends through various economic cycles.” He adds that CoreShares will be listing the first global equity dividend ETF (Sharecode: GLODIV) on 22 February 2018 at a management fee of 0.35% and with an expected TER of 0.60%.


TAX-FREE INVESTING FEATURE

28 February 2018

LISA AIREY Strategy Analyst, Old Mutual Unit Trusts

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Target markets not capitalising on TFSAs

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n 2015, the National Treasury introduced Tax-Free Savings Accounts (TFSAs) in South Africa, with the objective of improving South Africa’s weak savings culture especially in the lower to middleincome group. Ten years earlier, the Financial Services Charter had been adopted with a key pillar of access to financial services. This pillar was focused on financial inclusion and intended to provide products and services for building funds over time like savings accounts, savings products, collective investments and community-based savings schemes. Finscope data showed that financial inclusion for all adults in South Africa increased substantially in the ten years from 17.7 million adults in 2004 to 31.4 million adults in 2014. Today, the banked South African adult population is at 75% representing an improvement of 65% in financial inclusion since 2004. Household savings stubbornly low However, despite this improvement, the household savings rate remains a concern. In fact, South Africa’s household savings have been within 14%15% for almost a century. The 2017 TFSA Intellidex Research shows that an encouraging 13% of TFSAs was opened by first time savers since inception, with the middle to upper-income groups taking the most advantage of this opportunity. The targeted impact

of improving the savings habits of the core target market (low to middle -income) remains low. So why are target markets not capitalising on TFSAs? Complex investment environment The Old Mutual Savings and Investments Monitor has consistently showed that financial services are perceived as a complex industry with a complicated service offering. Over the seven years since the survey has been held, on average less than 50% of respondents have indicated that they know a lot about financial services while just over 40% said that they are always looking out for the latest financial services products. Even more concerning is the fact that lower income earners tend to be less confident in making financial decisions and more likely to be confused or intimidated by the industry. They indicated, however, that they are hungry for knowledge and financial education.

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Indebtedness The Monitor also reveals that debt levels and financial stress continue to be closely linked, with 64% describing their stress levels as ‘overwhelming’ and admitting to having too much debt and trouble managing it (compared to only 3% describing their

stress levels as low). Low income households have the most trouble managing their debt and their position has worsened further over the period.

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Poverty and savings It’s a vicious cycle as you have to save to get out of poverty but also need to get out of poverty to be able to save. Unfortunately, the poverty rate in South Africa increased from 53% in 2011 to 55% in 2016, despite the widened social grant net. In conclusion, TFSAs are a great solution to South Africa’s poor savings culture. It is encouraging that the take-up of these products has been so good and even though the originally intended target market is not the one benefiting yet, it talks to the attractiveness of the product. The success of the partnership between government and the private sector to solve such a complex socioeconomic problem is reassuring. Considering the amount of investment into financial education by the sector, these products might just achieve their goal over the longer term. See link for disclaimer: https://www.oldmutual.co.za/ personal/investments-and-savings/unit-trusts/aboutus/governance/disclaimer

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Invest now by contacting an Old Mutual financial adviser or your broker, or call 0860 INVEST (468378) and invest where the fund managers invest. oldmutualinvest.com/asinvested Old Mutual Investment Group (Pty) Ltd and Old Mutual Customised Solutions (Pty) Ltd are licensed financial services providers, approved by the Registrar of Financial Services (www.fsb.co.za) to provide intermediary services and advice in terms of the Financial Advisory and Intermediary Services Act 37 of 2002. These entities are wholly owned subsidiaries of Old Mutual Investment Group Holdings (Pty) Ltd and are members of the Old Mutual Investment Group.


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TAX-FREE INVESTING FEATURE

PIETER HUGO MD, Prudential Unit Trusts

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mong Prudential’s five tax-free unit trusts, the most popular investment fund choices have been the Prudential Enhanced SA Property Tracker Fund and the Prudential Balanced Fund. One of the reasons the Property Fund is so popular is its potential for relatively higher tax savings while also boosting potential long-term portfolio returns. Yet no matter which tax-free investment vehicle you choose, it’s important to remember to make sure it fits within a holistic long-term financial plan. Focus on how to maximise your long-term after-tax return – not on simply what gives you the biggest short-term tax saving. It is difficult to determine which types of tax-free investments would offer an individual the most benefit. The actual tax savings compared to normal (nontax-free) unit trusts is dependent on a combination of factors, the primary two being: 1) Your marginal income tax rate; and 2) The type and quantum of income and capital gains earned in your selected unit trust. Obviously, the higher your marginal income tax rate, the more you will save in these vehicles. At the same time, fund returns are taxed according to their source of income. Taking a hypothetical example to illustrate possible fund returns and tax savings over time, let’s see how much tax savings would accumulate to an investor in the 45% income tax bracket if they

Tax-free investments: How are investors benefiting? had been able to invest tax-free over the past 15 years and selected the Prudential Enhanced SA Property Tracker Fund tax-free unit trust. They are able to invest the full annual allowance of R33 000 every year for 15 years, which means that they would have contributed a total of R495 000 over the period. This is very near the current maximum R500 000 lifetime limit. I have used the highest possible tax bracket and allowable contribution expressly to try to provide an indication of what could be the upper limit of the tax saving for individuals. The graph shows that the R495 000 investment in the tax-free fund would have grown to a total of R2.23m by the end of 2017. By comparison, the same investment in the non-tax-free version of the Prudential Enhanced SA Property Tracker Fund (the identical fund but not the tax-free investment vehicle), and at the same fees, would have grown to R1.98m with R255 000 paid in taxes on interest and dividends (and with no annual exemptions applied). Then, if the investor decides to sell all or part of the non-tax-free investment, they will have to pay CGT of around R244 000 on these gains, reducing the investment value to R1.74m and thus making the tax-free unit trust even more attractive. The investor would therefore have notched up an extra R500 000 at the end of the 15-year investment horizon solely as a result of the tax-free benefits

DAVID CHARD, Head of Life and Invest, PSG Wealth

The end of the tax year in February often sees something of a scramble as everyone pushes to get their applications in ahead of the deadline. Rising tax rates not only mean that it is more important to save smartly than ever before, but also emphasises the importance of taking a holistic approach to maximising your tax savings. Tax-free savings accounts (TFSAs) are some of the most popular tax-efficient products, and the looming tax year-end in February means you should act soon if you still want to maximise your tax savings for this year.  Below, are seven common questions and answers we receive about TFSAs.

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What are the main benefits of a TFSA?

You don’t pay any tax on investment income (interest and dividends) earned in the product, or any capital

28 February 2018

R2 500 000 R243 727

R2 000 000

R255 093 R1 500 000

R1 000 000

R2 236 234 R1 737 413

R500 000

R0 Tax-free investment Investment value

After-tax investment Tax on interest/dividends

2

Is there a limit to how much I can invest in a TFSA?

National Treasury has increased the annual contribution limit to R33 000 and the lifetime limit is R500 000. You will not be penalised on investment growth above these amounts. However, you will pay a penalty tax of 40% on income and growth earned on the amount you contribute above the limits.

Who can invest in a TFSA?

This product is only available to individuals who are South African tax citizens. 

Capital gains tax

Source: Prudential Investment Managers

of this vehicle. This is a substantial bonus for anyone to add to their retirement income. A similar example for an investor in the tax-free Prudential Balanced Fund in the 28% marginal income tax bracket would have resulted in an additional R270 000 investment value at the end of 15 years. It is particularly beneficial to hold listed property companies in the form of REITs inside a tax-free investment because there is effectively no corporate or individual tax on the investment returns. While it may seem like holding cash inside a tax-free investment is also

Top investor questions on TFSAs 4

gains. Asset allocation restrictions do not apply, and no minimum investment period is required. You are also not limited on the withdrawals you can make from your investment.

3

Graph 1: Benefits of tax-free investments

Can I open a TFSA on behalf of my child?

Yes, this may be an effective way of saving for your child’s future provided they also have a bank account. However, bear in mind that the contribution limits will apply and if you reach the lifetime limit, your child will not be able to contribute more at a later stage.

5

What options are available to invest in via a TFSA?

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Can I transfer into a TFSA from another product?

You can invest in a range of unit trusts that do not charge performance fees. The fund selection covers a wide range of asset classes and includes offshore funds.

You cannot convert existing investments in other products to a TFSA, even if the underlying assets are the same. You

very attractive, because it does offer relatively high short-term tax savings, it may in fact be the least appropriate asset class to choose for your tax-free investment over the long term. The primary concern of investing in cash (and other short-term assets) is that it earns after-inflation annual returns of 1%-2% over the long term. This is substantially less than the 6%-8% annual real return provided by growth assets like equities and listed property. The returns on these longer-term investments reinvested and compounded over many years, will likely be much more powerful than cash.

will have to withdraw your existing investment and reinvest. Product transfers between existing TFSAs are not currently allowed, although it is expected that these transfers will soon be permitted.

7

Are my contributions flexible? What if I encounter a tough time in my personal finances?

You can make debit order investments or lump sum investments. TFSAs are completely flexible investments. The minimum initial lump sum investment for the PSG Wealth Tax Free Investment Plan, for example, is R6 000, and the minimum amounts for debit order investments are R500 a month, R1 500 a quarter, R3 000 halfyearly and R6 000 yearly. There are no penalties if you miss, stop or reduce recurring contributions.


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But consistent top performance is the intelligent choice. Tax-free investing might be a no brainer.

OUR DIVERSE RANGE OF TAX-FREE FUNDS: Prudential Balanced Fund

Prudential Enhanced Income Fund Prudential Inflation Plus Fund Prudential Enhanced SA Property Tracker Fund Prudential Dividend Maximiser Fund

Invest now online at prudential.co.za

Source: Morningstar for dates ended 31 December 2017. 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 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 R33 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. 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 PrudentialĂ…s products on the Prudential website. Fund prices are published daily on the Prudential website. These are also available upon request.


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TAX-FREE INVESTING FEATURE

LILIANE BARNARD CEO, Metope Investment Managers

TFSAs: Why listed property is the most tax efficient option

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he most tax efficient use of a TFSA is investing in the tax-free class of a listed property unit trust. This is because Real Estate Investment Trust (REIT)1 listed property investments generate a high pre-tax and growing income stream. Taxation of REIT dividends occurs in the hands of the investor who is taxed at his or her marginal tax rate and which, in a TFSA, is tax-free. In comparison, equity investments generate a lower dividend yield, paid from after-tax company profits and received after a 20% dividend withholding tax is deducted. Bond and money market income yields are taxed as interest and are exempt from tax up to a certain amount, and then attract the marginal tax rate. There is no inherent underlying growth in income from these investments. Best for long-term investments with high expected returns using compounding Wealth creation through the compounding of income returns is exactly what an investment in listed property provides for the patient investor. Saving on taxes materially enhances this compounding phenomenon. Compounding income (ie the returns on reinvested income) added more than 3.5% pa to total returns over the last 10 years. A simplified example* The higher an investor’s marginal tax rate, the greater the tax savings when invested in a listed property TFSA. As an example, we assume a 12.5% pa total return for both listed property and equity, resulting in a final value of R1.44m after 15 years. Given a REIT dividend yield of

6.5% and an equity dividend yield of 3%, at the lowest marginal tax rate of 18%, the total tax saved in a listed property TFSA for an investor is R118 357 versus R94 291 in an equity TFSA. At the highest marginal tax rate of 45%, the listed property tax savings amounts to R295 891 versus R167 617 in an equity TFSA. Listed property is a clear front runner Listed property is particularly well suited to offer the most tax benefits for investors opting to save money via TFSAs. In addition, there will be benefits of compounding tax-free total returns when re-investing the income yield.

28 February 2018

Tax-free investment ideal for funding education According to Donna Barnes, Product Owner, Tax-Free Investments at Nedgroup Investments, tax-free investments are ideal for parents preparing to pay for a child’s education. “Investors are able to invest a relatively small amount of money and take advantage of the medium- to long-term benefits of compounding, without paying any tax on interest, dividends or capital gains. The additional tax savings these investments offer can also add up and compound over time – growing into a substantial investment which can go a long way in covering education costs,” she explains. To illustrate that TFI is a ‘no-brainer’, Barnes unpacks the table below: “If you stick to this monthly discipline for five years in a low equity balanced fund, your R165 000 contribution can be worth just over R200 000, or over a 10-year period your R330 000 contribution can reach to just over R500 000.

A Real Estate Investment Trust (REIT) is a listed

1

property investment vehicle that publicly trades on the JSE REIT board and qualifies for the REIT tax dispensation. REITs must pay at least 75% of their taxable earnings available as a distribution to their investors each year.

*For an unedited version of this article, including full examples with tables and graphs, please see the 31 January 2018 edition of MoneyMarketing (INVESTING section).

“In addition, you are not subject to any capital gains tax (CGT) at withdrawal and you will be able to put the full expected value in your pocket, unlike withdrawing from a normal unit trust investment.” Many South Africans only realise the full extent of the cost of education once a child starts school – and this then adds to the financial burden of a household. With tax-free investments, investors can invest as little as R500 per month and take advantage of the tax savings. “Tax-free investments, if used wisely can have significant and positive long-term financial consequences. The key is to start contributing as soon as possible – and to try to contribute the maximum annual allowance to get the full benefits of the tax savings over time,” says Barnes. Investors can contribute up to a maximum of R33 000 per year (R2 750 per month) or R500 000 over a lifetime into a taxfree investment.


TAX-FREE

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ACCESS A SATRIX TAX-FREE SAVINGS ACCOUNT ONLINE AND YOU’LL ALSO HAVE THE BENEFIT OF LOW COST ETF’S WITH NO MINIMUMS.

www.satrix.co.za Satrix Managers (RF) (Pty) Ltd is an authorised financial services provider and a registered and approved manager in terms of the Collective Investment Schemes Control Act.


20

TAX-FREE INVESTING FEATURE

NICHOLAS KINGHORN Retail Sales, Prescient Investment Management

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Making the most of tax-free investing

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Y

Sculpture by Beth Diane Armstrong

axes can significantly impact after-tax investment returns, and the cash left over to spend or retire on. However, before considering a tax-free investment, it is important for savers to understand the benefits attached to these investments. They should also have a firm grasp of the relevant legislation and the alternatives to these investment vehicles. When trying to maximise cash from an investment, there are certain circumstances where a tax-free investment is preferable, while at other times it makes very little difference when comparing a taxed investment to a tax-free one. According to SARS, a maximum of R33 000 a year may be contributed to a tax-free investment, with a lifetime limit of R500 000 per person. It is therefore important to ensure the maximum amount is utilised each year as this does not carry over and can make a considerable difference over time. It is also vital not to invest more than R33 000 a year as a penalty of 40% is levied by SARS on the difference. According to Morningstar, the average money market fund returned 7.6% per annum after fees as at 31 December 2017. Post-tax returns fell to 5.8% a year. An investment of R1 000 000 returning 7.6% a year for 10 years has a terminal value of R2 080 284. Post-tax, it is only worth R1 751 793, translating into a mammoth R328 491 (32.8%) of the investment value being eroded through taxes. The above simple calculation accounts for the R23 800 annual income tax allowance. For investors that have annual income returns below R23 800, it makes no difference whether the investment is taxable or tax free. Hence, taxes influence investment returns significantly and should be an important consideration in decision-making. However, investors considering a tax-free investment vehicle are faced with the main disadvantage that legislation limits the maximum investable amount to R33 000 a year. Additionally, in the aftermath of the dismal Medium-Term Budget Policy Statement, revealing significant revenue shortfalls, escalating debt and a low growth outlook, the most likely manner for National Treasury to make up the shortfall is by raising taxes. Meanwhile, despite the revenue shortfall, populist policies like free higher education also increase the likelihood of higher taxes making after-tax investment returns even more essential. Prescient Investment Management has managed to overcome these obstacles. By utilising an overlay strategy, the Prescient Money Mktg 1-4 Goose Ad_r3.pdf 7/19/17

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28 February 2018

Using the Section 12J benefit

Source: Prescient Investment Management (Pty) Ltd

Prescient Optimised Income Fund invests in domestically listed shares as well as money market instruments to meet liquidity requirements. The end result is a strong and stable non-taxable yield with the risk of capital loss completely hedged out. The fund is not classified as a tax-free investment vehicle, meaning no maximum annual investment limits apply, which is a massive advantage. The illustration compares the cumulative investment value of R1 000 000 invested in the Prescient Optimised Income Fund versus the average of all the money market funds after tax (monthly accrual), for the period since inception of the Prescient Optimised Income Fund. As can be seen, on an after-tax basis, the Prescient Optimised Income Fund has outperformed and the difference grows substantially over time. This can be very deceptive as quoted fund performance is normally on a before tax basis, meaning the cash left over at the end of an investment stands to differ significantly depending on the duration of the investment and the amount of tax paid over the period. The Prescient Optimised Income Fund, like other money market funds, distributes its income monthly. Capital is also completely protected at all times. Prescient Investment Management (Pty) Ltd, is an authorised financial services provider (FSP 612). Collective Investment Schemes in Securities (CIS) should be considered as medium to long-term investments. The value may go up as well as down and past performance is not necessarily a guide to future performance. CIS’s are traded at the ruling price and can engage in scrip lending and borrowing. Performance has been calculated using net NAV to NAV numbers with income reinvested. There is no guarantee in respect of capital or returns in a portfolio. Prescient Management Company (RF) (Pty) Ltd is registered and approved under the Collective Investment Schemes Control Act (No.45 of 2002). For any additional information such as fund prices, fees, brochures, minimum disclosure documents and application forms please go to www.prescient.co.za 10:27:12 AM

SA’s largest Section 12J manager, Westbrooke Alternative Asset Management, looks after almost half of the capital invested in S12J funds in the country. Its latest offerings include investments in high quality hospitality and student accommodation businesses. Jonti Osher, fund manager at Westbrooke Alternative Asset Management explains: “If you subscribe for shares in one or a combination of our funds, you will be able to deduct your full investment against your taxable income and thus reduce the amount of tax payable at the end of February 2018.” S12J is an investment tax incentive that was introduced by SARS to boost the economy by encouraging investment into private companies of a specific size which operate in select industries. The incentive gives individuals, companies and trusts the ability to write off 100% of the investment against their taxable income in the year they invest. Therefore, investors can benefit from up to 45% immediate tax relief, reducing the cost of the investment while providing downside protection and enhancing overall returns. However, the investment must be held for at least five years. The S12J asset class is particularly attractive to those taxpayers who have incurred capital gains tax, as the S12J deduction is available against all forms of taxable income before the close of the February tax year. The minimum investment in these S12J funds is R500 000 and the offers close on 23 February 2018.

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EMPLOYEE BENEFITS FEATURE

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EMPLOYEE BENEFITS FEATURE

28 February 2018

Boost staff wellness and reduce risk-related costs

When it comes to the process of managing risks, there are considerable advantages for the employer when they have a single point of contact to integrate and support health and wellbeing initiatives in the workforce on their behalf,” says Dr Jacques Snyman, clinical development expert for Agility Corporate. Meaningfully addressing the full spectrum of health and wellness needs in the corporate environment requires an integrated solution. “A holistic approach, encompassing occupational health, preventative and curative care, as well as productivity and wellbeing including absenteeism management, is the surest route to mitigating risk and avoiding more costly problems developing in future,” he points out. “Where these aspects are dealt with separately, opportunities to identify and proactively manage risk related to employee health and wellbeing can easily fall between the cracks. This could potentially lead to devastating long-term consequences in the lives of valued employees and their families.” Dr Snyman highlights that corporate South Africa loses approximately R55.2 bn to sick leave per annum. However, when at-risk employees are identified early and assisted to manage their health conditions effectively and appropriately, they remain healthier and more productive, ensuring impressive bottom-line and balance sheet savings for the employer. “Through holistic solutions underpinned

by physical and biometric data, focusing on preventative care that is seamlessly integrated with the employees’ curative care programme including occupational health and medical scheme cover, valued staff members can be better protected. “From a group risk and employee benefits perspective, it makes sense to integrate all contributing elements of risk for a more effective, holistic solution, which not only reduces administration costs but can also serve as a basis for negotiating lower group risk premiums, as the efforts to mitigate such risks are demonstrable.” For staff enrolled on the Agility Employee Wellbeing programme, early identification of potential health concerns ensures that the individual receives the required medical care to mitigate potential health risks and prevent more serious health events, wherever possible. Furthermore, this programme assists with identifying trends and statistics on productivity and wellbeing in the workplace to support specific employer wellbeing strategies. Dr Snyman says that not only does the integrated health, risk and wellbeing solution serve to attract and retain quality staff members through building a company’s profile as an employer of choice, but it also stimulates output. “With reduced levels of absenteeism and healthy workers tending to be more engaged at work, productivity improves. As health and

wellness related causes of staff attrition are reduced, the costs of recruiting new employees and additional training are saved,” he observes. The Agility Corporate approach integrates a number of processes and products into a unique, seamless solution for employers and employees. Agility StaffCare takes care of occupational health among low-income employees; Agility Employee Wellbeing provides holistic preventative and productivity management, incorporating absenteeism management, while Agility Life offers group risk benefits. Medical scheme and health benefits are available through Agility Corporate’s medical scheme partners, Agility Gap & CoPay, and the popular Zurreal Healthcard. Completing this 360-degree solution, Agility Retirement Fund Solutions caters to the need for retirement benefits. “Investing in an end-to-end employee health, risk and wellbeing solution can therefore result in considerable savings for the employer while ensuring that valued staff members are retained and their contributions to the company are optimised for many years to come,” he adds.

Innovative employee benefits a competitive advantage for SMEs 1 2

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he 2017 Old Mutual Corporate SME Employee Benefits Monitor revealed that the provision of employee benefit solutions can be a significant source of competitive advantage for a small to medium enterprise (SME). However, the research also found that SMEs perceive employee benefits as another cost or administrative burden to ‘comply’ with. Samantha Jagdessi, Head of Benefits Consulting, Old Mutual Corporate Consultants, says this doesn’t have to be the case. “While well-resourced corporates tend to traditionally hold the advantage over SMEs in terms of offering better benefits, SMEs are able to tailor their benefits package to suit their means, thereby allowing them to gain a valuable competitive advantage.” When implementing an employee benefit structure, there are typically three aspects to take into account:

Consider how retirement provision will be funded SME decision makers need to consider whether the business will contribute toward employee’s savings fully, partially or only manage the administration thereof. While the introduction of enabling retirement saving will ensure positive outcomes for staff, debt-burdened staff may struggle financially should they experience a dramatic decrease in take-home pay in favour of contributing to long-term retirement savings. To avoid such an instance, decision makers could consider using a percentage of its staff ’s annual increase to fund retirement provision before they grow accustomed to an increase in salary. Other options, which have often worked for a mixed workforce (blue- and whitecollar workers), is a ‘like-for-like’ funding model where the employer matches the contribution made by the employee.

Consider the levels of flexibility required by your workforce and the associated cost By limiting choices available to lowincome employees, administrative costs can be reduced, thereby passing on more value to employees. White-collar workers, however, generally want more flexibility and control over their investments. Albeit more costly, companies employing highly skilled workers – often the most difficult to retain – may benefit from offering their staff some control over their contribution level, investment choice and risk benefits.

3

Consider if your staff are investment-savvy and what level of support is required White-collar workers tend to have greater levels of formal education and are in a better position to take responsibility for their own retirement provisions. Often highly digitally connected,

Dr Jacques Snyman, Clinical Development Expert for Agility Corporate

these employees have sufficient access to information required to make good decisions, however, when needing assistance, they generally demand immediate individual attention. Blue-collar employees generally display higher rates of consumer vulnerability. With limited access to the internet, they rely on the fiduciary duty of trustees and decision makers to make good decisions on their behalf. “In a workplace with both white- and blue-collar workers, hands-on seminars and workshops should be facilitated by trained employee benefit consultants to bridge the gap in education and financial confidence,” says Jagdessi.

Samantha Jagdessi, Head of Benefits Consulting, Old Mutual Corporate Consultants


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Overall outcome = shifting your dial from red (poor financial health) to green (good financial health) by securing your financial well-being for a lifetime. Alexander Forbes research indicates that South African employers waste a staggering 35% of their payroll costs. This is as a result of employee productivity being reduced by medical and financial problems. We can help you eliminate this waste through our targeted financial well-being interventions – speak to us today.

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RISK

24

RISK

28 February 2018

Insurance premium financing: FAQs The Fulcrum Group is a financial services provider offering bespoke lending, investment and management services to the insurance and intermediary market. With a number of specialist capital solutions, they answer frequently asked questions about insurance premium financing. What is insurance premium financing? Premium financing is a funding mechanism that allows corporate and commercial businesses to finance their annual short-term insurance premiums by paying them off on a monthly basis. The funding mechanism means clients can enjoy the benefits of annual insurance policies while ensuring that the upfront payment requirement doesn’t impact their cash flow. What benefits does it offer to brokers? Premium financing offers three main benefits to brokers: • Financial – Brokers receive their full annual fees and commissions upfront, providing a welcome cash injection into their businesses • Client retention – Annual policies ensure that clients are less likely to move to another brokerage during the term of the policy • Reduced administration – Fulcrum administers the debit orders and credit control, which results in less admin for the broker How do brokers decide whether or not insurance premium financing is right for their clients? Premium financing is an option that should be considered by all businesses, regardless of size or sector. The more sizable or complex the policy, the more benefit the client stands to gain. The best course of action for brokers would be to discuss your book with a premium financing service provider to help decide which clients would benefit the most from a premium financing service.   What benefits does insurance premium financing offer to clients?  There are several financial benefits to organisations who take up premium financing on their insurance. Firstly, instead of paying for their annual premiums upfront, clients can rather inject this ‘saved’ cash into their businesses. This allows them to realise a higher rate of return than the cost of borrowing associated with the premium finance product. Secondly, for clients who are currently

on monthly policies with insurers, the discount associated with changing to an annual policy is usually higher than the premium finance charges. Going the premium finance route will therefore result in an additional saving for the client. Thirdly, this source of finance is available at aggressive rates and will not affect the client’s existing banking facilities. In addition, no security is required to affect the transaction. The client also benefits at an operational level. Fulcrum’s premium financing offering allows for multiple lines of cover to be incorporated into one policy and one monthly debit order. How onerous is the process of setting up insurance premium finance – and how much paperwork does the process involve? As part of annual renewal or new policy discussions, the broker quotes the client an annual insurance premium and discusses the benefits of premium financing as an option. If the client is interested, the broker – or the insured – contacts a premium finance provider for a quote. In order to provide a premium financing quotation, the following information would typically be required: • Client information sheet • Audited financial statements (At Fulcrum we only require statements if annual premiums total more than R1m. We are also happy to quote without audited financial statements, but our quotation would then be subject to credit approval). • A detailed breakdown of the premium If the client is happy with the quotation, we would then draw up the documentation, which is really simple and easy to understand, and send it through for signature. Once activated, we would collect the instalments due and pay the premium to the insurer or broker in line with the policy requirements. At the end of the day, premium financing is an option that benefits brokers, insurers and policyholders alike. The set-up process is quick and simple, with minimal admin and paperwork required. Instead of asking: “Why should my client take out premium financing”, brokers should rather be asking: “Why shouldn’t they?”

Brokers need to adapt to constant change

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nsurers and brokers have no choice but to adapt to constant change in order to thrive. This is as the insurance industry continues to evolve while facing new challenges, catastrophes, technological disruptions as well as uncertain, volatile and complex economic conditions. According to Malesela Maupa, Head of Insurer Relationships at FNB Insurance Brokers, there are five key trends that are likely to shape the South African insurance industry this year. •  Regulation – regulatory changes will be at the top of the agenda for insurers as they ensure that their businesses comply with key amendments impacting the entire financial services industry, namely: ›› Retail Distribution Review – revolutionises how financial services companies offer advice and distribute products to customers. ›› Twin Peaks – introduces a new prudential regulator located in the South African Reserve Bank to ensure that consumers are offered more protection and make the financial services system more resilient. ›› Policyholders Protection Rules amendments – aim to improve market conditions in the insurance industry and further ensure that consumers get access to adequate products. ›› Protection of Personal Information Act – regulates how customer data is managed. ›› Treating Customers Fairly – ensures that all financial institutions adhere to the required customer treatment standards.                   • Climate Change – the increase in the frequency and severity of extreme weather conditions, coupled with intensifying natural catastrophes will continue to have a significant impact on clients and ultimately on the bottom line of insurers.   “Natural catastrophes, business interruption and cyber incidents are the top three risks that clients should protect their businesses against to avoid incurring severe financial losses,” says Maupa.     • Stringent underwriting measures – due to the ongoing strain endured by global reinsurance and insurance markets as a result of increasing catastrophic losses and insurance costs, more stringent underwriting and proactive risk management measures are likely to be taken. • Product innovation – insurers will continue working around the clock to develop innovative products that meet the ever changing needs of customers.   “For example, as South Africa increasingly becomes a litigious country, more liability based products like Social Media Liability cover are being introduced in the market,” he adds.   • Technology – traditional insurers will be required to put in more effort to catch up with start-up disrupters who are progressively using technology and data analytics tools for policy management and administration, amongst other innovations that challenge the traditional insurance model.    “Given the unprecedented challenges and changes that continue to shape the global insurance industry, it Malesela Maupa, is essential for insurers and Head of Insurer brokers in South Africa to Relationships, always remain prepared,” FNB Insurance says Maupa. Brokers


IS GREATNESS RANDOM, OR THE COMING TOGETHER OF PURPOSE? The world’s great mountains have forever drawn adventurers to their peaks. But we are more in awe of the hidden power below where forces collide, causing continents to rise. It’s how we choose to harness the forces at hand that set us apart. The greater the challenge, the greater our inspiration. As a business enabler, the Fulcrum Group offers bespoke lending, investment and management services, specialising in insurance markets. We drive ourselves to create products and services that make a difference – no matter how big or small your business challenge. Because we believe there is always a better way.


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RISK

28 February 2018

BRAD TOERIEN CEO, FMI

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Your clients’ income today pays for their plans tomorrow

our clients have dreams for the future – whether it’s that once in a lifetime holiday or planning for their retirement, they want the comfort, security and independence that comes from knowing they are adequately providing for themselves and their spouse. To ensure their dreams become a reality, they need a carefully structured investment plan.

But, what would happen if they got sick or injured and couldn’t earn an income – even for just a few weeks? Often, insurance to protect a client’s monthly income stream is overlooked. Not only is it imperative that your clients cover themselves and their families from the immediate effects of not earning an income, but a break in their income could also have an enormous impact on their future plans. How would they pay their monthly investment or RA contributions? They may be forced to stop payments, incurring penalties and fees as a result. And how would your clients continue to pay for their monthly living expenses? They would have to borrow money or access their savings. Take FMI policyholder, Allan Swanepoel. He started Suntropica Farms with a business partner fifteen years ago. They began small but today their company is a major culinary herb supplier to large retailers nationwide. Over the years, Allan has had to undergo several

surgeries including a back fusion, two knee operations, a hip replacement and ankle fusion. Because of his cover with FMI, he has always had peace of mind during periods of recuperation, which ensured he never had to worry about being able to afford his monthly expenses and investment contributions. That’s because Allan’s policy with FMI provides a combination of monthly income and lump sum benefits in the event of temporary or long-term disability, critical illness or death. Our income benefits are ideally suited to meet Allan’s ongoing monthly expenses like groceries, electricity and investment contributions. And the lump sum benefits are perfect to allow for any one-off costs like additional hospital bills or paying off debt. Traditional life insurance benefits have been predominantly lump sum based, which ignores the fact that what you are really trying to protect is your client’s income stream. This approach has a negative impact on investment

planning for many reasons. Lump sum benefits typically only protect against permanent disabilities, and yet most injuries and illnesses are temporary. If Allan’s policy didn’t include an income benefit, only one of his seven claims could have potentially been paid. In addition, it’s far easier to work out the cover your client needs when using a combination of income and lump sum benefits because the income is directly related to your client’s current monthly earnings and the lump sum to the amount of debt they are servicing. Allan’s case is not the exception. Seven out of 10 people will have at least one injury or illness in their working lives that will prevent them from earning their salary. What’s more is that people are three times more likely to claim again, after their first claim. As you can see from Allan’s experience, multiple claims are a reality, so it’s critical that your clients have the right cover in place that will protect their income and their investment savings.

I LIKE TO THINK OF MYSELF AS BULLETPROOF AND I WOULDN’T GET SICK, BUT THINGS CAN HAPPEN. - ALLAN SWANEPOEL BUSINESS OWNER

Life is unpredictable. That’s why we protect your future plans and dreams. To watch Allan’s story and others, go to: fmi.co.za FMI is a Division of Bidvest Life Ltd, a licensed Life Insurance Company and authorised Financial Services Provider FSP 47801


RISK 27

28 February 2018

Three reasons why your commercial claim may be rejected 3

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s a business owner, there are so many aspects to consider and understand to ensure a successful enterprise. “Key among them is your insurance cover,” says Jurgen Hellweg, CEO of Western National Insurance. “Being aware of common issues that could affect a claim can prepare you and keep you in business.” It is difficult to highlight why a claim may be repudiated, or not be paid out adequately because commercial insurance is quite different to personal cover. “The types of risks faced by a business owner may vary enormously depending on the industry they operate in, however there are some key risks that any business owner can avoid to ensure a smoother and more successful process, should the need to claim arise,” he says.

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Not working transparently with a qualified commercial short-term adviser As your business will have unique risks, an adviser is best placed to make sure you get adequate cover. While elements of running your business may seem simple, insurance is technical and there are hidden risks you may not think of. An adviser knows how to calculate appropriate insured values and how to structure your excesses to best suit your cash flow. Hellweg says the key is to be honest and open with

your adviser and therefore your insurer – from your history to any changes that may need to be factored in to your cover. “Consider for example, a building owner who has business tenants. At time of taking out cover, the details of the tenants were declared to the insurer who assessed the risk as being acceptable for the premium charged. Over the period of the year, there is a change in tenants, where the new tenant may be considered a higher risk. By not declaring any changes during the period of insurance, any claims – such as damages from a fire to the building – may be rejected.”

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Failing to identify the risks that could put you out of business These risks don’t always jump out at you, and if they do, you might be tempted to skimp on the cover because the event is unlikely to – or seldom happens. “The impulse is to insure those day to day risks, which will probably never put you out of business but happen on a regular basis, but what will you do if the unthinkable happens and your entire business is destroyed? Only insuring your cell phone will be your biggest mistake,” Hellweg says. “Interestingly, cover for a huge loss is actually not as expensive to take out, and will be worth so much more than the price you pay should you ever need to utilise it.”

Western National Insurance Company (Pty) Ltd, affiliates of the PSG Konsult Group, are authorised financial services providers. (FAIS: Juristic Reps under FSP 9465)

Not maintaining your part Any assets you insure from your buildings to vehicles, equipment, machinery and the like must be maintained in order for your insurance cover to be consistent. “Maintenance falls on you, the business owner. Failing to keep up maintenance will likely result in a claim being rejected, as elements like ‘wear and tear’ are possible to detect at claims stage. There would be nothing worse than receiving no pay-out simply because you didn’t service your vehicle, which lead to a malfunction or accident, or you didn’t repair a leak in your building’s roof, which lead to a bad flood,” Hellweg adds. It is best to keep up your side of the deal and to build sound relationships with your insurer and broker – this will give you peace of mind and certainly go a long way to keeping you in business.

Jurgen Hellweg, CEO, Western National Insurance


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RISK

28 February 2018

Online content creators must be aware of liability risks

GEOFFREY DE PINCHART Business Unit Manager for D&O Liability, Aon South Africa

Why decisionmakers need D&O insurance

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irectors and Officers (D&O) liability claims affect directors, officers and employees serving in a managerial or supervisory capacity. Whilst serving a company of any size ranging from large to small, public and private, even non-profit organisations and membership associations, they need comprehensive cover for liabilities that could arise from them being held liable for wrongdoings in conducting their managerial responsibilities.  Here are the most important reasons to talk to your broker about D&O cover:     • Typically in private companies, the directors often invest their own personal wealth in the business, which means their net worth is directly tied to the financial health of the company. Defending a claim without D&O cover could directly impact their family’s financial security and personal assets, and is a costly undertaking.  • D&O claims are stressful and long-tailed, with the legal process often taking years to come to conclusion. This can distract the directors from running the business effectively. Having access to quality attorneys with the relevant knowledge and expertise to defend them will give them some comfort in these trying times. • Bad business decisions are likely to be more visible in a poor economic environment thus attracting the increased attention of shareholders and other third parties who are looking to recover losses. • Unforeseen and unexpected investigations by government and regulatory agencies can generate enormous defence costs even if no wrongdoing is found. • Bankruptcy situations can lead to claims by lenders, creditors and bankrupt trustees. • D&O insurance takes care of steep defence costs, thereby ensuring that a company’s cash flow remains unaffected. The cost of defending corporate lawsuits may exceed the net worth of most private companies. In some cases the company may not be able to pay the defence costs as it may be prohibited by law. • A comprehensive D&O programme can attract good talent on the board of directors of the company. • Directors and managers may be held criminally liable for the death of staff members if accused of not providing a safe work environment. A D&O policy will provide defence costs to protect them. • Cyber breaches are an ever growing risk. Should directors be held liable for a breach that affected the share price, they could be held liable by shareholders or a third party who feels that the directors did not have the necessary security in place to protect their information. The policy would respond to protect them. • If the director or manager is held liable for unfair labour practice the policy would respond to protect them.

With the number of social media influencers and content creators increasing almost daily, more and more people run the risk of criminal and civil liability for their online activities. It is therefore wise for them to talk to their insurance brokers to determine their potential risks. Johannes du Plessis, Legal Adviser, Risk Benefit Solutions, says that the risks faced by people posting on social media could range from unintentional copyright infringement to defamation and even criminal injury. “It is common nowadays to see influencers and regular content creators post blogs, tweets and video clips that reach audiences of thousands. It is extremely important for them to be mindful of the kind of mistakes that could cost them huge amounts of money in damages and legal bills.” Du Plessis says that copyright infringement is one of the biggest risks faced by people who publish video clips and live stream events such as music concerts, sporting events, stage productions and tournaments. “Most of these events are subject to copyright as well as broadcasting and distribution rights. Posting unauthorised photos and videos of these events online, will likely infringe copyright as well as broadcasting and distribution rights of the hosts of the events.” Du Plessis adds that the rightful owners of the intellectual property can obtain court interdicts against the social media user: “The person posting the content can also be criminally investigated by the police and prosecuted by the National Prosecuting Authority and the State for creating and distributing a pirated copy of the event. The broadcaster that owns the rights to the event can also pursue civil action that could result in an enormous amount of legal costs and damages.”

Bad reviews

COPYRIGHT Online reviewers are also at risk of legal action if they INFRINGEMENT are not careful. “Businesses like IS ONE OF THE restaurants, shops and other enterprises BIGGEST RISKS that depend on customer foot traffic, can hold online reviewers to account for a FACED BY PEOPLE decline in prospective sales in products WHO PUBLISH or rendering of services, and ultimately in the loss of prospective income resulting VIDEO CLIPS from bad reviews.” He explains that in law, every business has the right to a good name and reputation. Any action that has the effect of injuring a business’ status in the market is defamatory, and the consumer may therefore be held liable. “It is also presumed in law that a defamatory statement is wrongful and done intentionally, until otherwise proven. It is therefore not the onus of the business to prove that the reviewer’s statement is wrongful, but rather the onus is shifted onto the reviewer to prove that their statements were not wrongful or intentional. Even if the reviewer successfully disproves intention to defame, negligence is still sufficient to be held civilly liable. “Even worse for the reviewer, whether the good name of the business involved has in fact been infringed is irrelevant when determining wrongfulness. The only relevant question is whether, in the opinion of a reasonable person, the reputation of the person concerned has been injured.” He adds that it is important for online reviewers and influencers not to make careless or needlessly harsh statements online, to take care not to copy or publish material subject to copy right as well as broadcasting and distribution rights, and to make sure that they have adequate personal liability insurance cover. Some legal insurance products include criminal defence and bail costs, and other insurance policies provide extensions for such civil liabilities. However, the wording of each insurance policy differs from insurer to insurer. It is therefore prudent for each reviewer and influencer to consult with their insurance broker to determine their potential risks, and which insurance policy would be best suitable. “Especially in cases where influencers and online content creators benefit financially from their work, having adequate liability cover may just save them from financial ruin one day,” Johannes du Plessis, Legal Adviser, Risk du Plessis says.  Benefit Solutions


RISK 29

28 February 2018

Cancer awareness counts How to stay financially fit in a health crisis

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ach year, 100 000 South Africans are diagnosed with cancer and, thanks to the focused awareness campaigns that feature on the calendar each year, we’re better informed about the many (over 200) types that exist, as well as their symptoms and treatment. However, what’s less well understood, says Hollard Life Head of Product and Technical, Ryan Chegwidden, is the toll that a cancer diagnosis can have on a family’s finances. “The last thing a family in the middle of a health crisis wants, is to be troubled by the additional burden of how they are going to keep their heads above water while the cancer patient recovers. Yet, the associated stresses can have debilitating effects on both their physical and mental health, as well as their quality of life. And that’s often due to the financial anxieties they face during costly treatment (even when it is covered by a good Medical Aid) and the potential loss of income if they are unable to work while they recover.” This is the subject of a study published in the America Cancer Society Journal, CANCER and, while it’s sobering stuff, Chegwidden points out: “Firstly, thanks to early detection and treatment, the recovery rate for cancer patients is better than ever. It is often not the ‘death sentence’ it once was, which is fantastic news. “Secondly, there are excellent insurance products available to help protect families from money concerns

at times like this and, with some careful planning upfront; all energies can be directed into getting well again, instead of worrying about the bills.” It’s always best to seek professional financial advice to determine your needs, and to ensure you’re clear on all the options available. Chegwidden provides pointers on things to raise in your discussions: What constitutes a good financial plan? Any illness is debilitating and cancer therapies like chemotherapy, surgery and radiation can leave the patient incapacitated for weeks, months and sometimes longer. Yet, regardless of the impact on your health, and ability to work, the bills won’t stop. So the protection provided by a good financial plan is essential and there are three key elements to consider: Medical Aid may cover some, or all, of your treatment costs but – depending on your benefit plan – there may be medical options you don’t qualify for, or other, onerous out of pocket carerelated expenses you have to carry. And, digging into your retirement or life savings to fund them is not ideal. So, while Medical Aid is a good place to start, your financial plan should also include Critical Illness insurance and Disability Income benefit. Critical Illness Insurance provides you with a lump sum payment on diagnosis, and enables you to meet

any unexpected expenses that may come with deterioration in health and changing lifestyle needs. Disability Income plugs the hole when your ability to work and earn an income is affected because you are either disabled or impaired. It allows you to meet your financial obligations and personal expenses so you and your family can maintain your standard of living during the weeks and months of recovery. Check what you are already covered for Policies evolve and, traditionally, Critical Illness Cover excluded very early (Stage 0) cancers. So, if you’ve already got cover, don’t make the mistake of assuming you’re fully protected. Get your financial adviser to confirm that you’ve got comprehensive cover from first diagnosis to Stage 4. Make sure your business can run without you Recovering from cancer can be a full time job, and worrying about whether your business can manage without you in the meantime is a stress you don’t need. Key-man Insurance is worth discussing, because it puts a plan in place to keep the business going until you’re able to steer the ship again. The need for Life Cover Nobody likes to discuss the elephant in the room but, an important part

Cancer Awareness Months

JANUARY - Skin Cancer FEBRUARY - World Cancer Day MARCH – COLORECTAL CANCER JUNE - CANCER SURVIVORS’ DAY SEPTEMBER – Childhood Cancer OCTOBER - Breast Cancer NOVEMBER – Prostate & Testicular Cancer

of any financial plan is making sure your family will be taken care of when you’re no longer here. And that applies whether you’re dealing with a cancer diagnosis or not. Life cover ensures they will receive a lump sum, or regular monthly payments, to meet their ongoing expenses and there are often additional features, such as Terminal Illness Cover which can be claimed in advance to help meet expenses. “Regardless of whether you’re dealing with a Stage 0 or Stage 4 diagnosis, cancer has a profound effect on everyone in the family circle. There are a multitude of needs to be catered for, and stresses to deal with, so it makes sense to eliminate the financial burden by putting a well-rounded financial and healthcare plan in place,” says Chegwidden. And what better time to do it than now, when cancer awareness is top of mind?

Ryan Chegwidden, Head of Product and Technical, Hollard Life

No elephant in the room when it comes to being HIV+

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e’ve come a long, long way from the time when an HIV+ diagnosis was seen as a death sentence. And the realisation that those who are serious about managing their treatment can live as healthily, happy and productively as anyone else, has changed the life insurance landscape too.  It was back in the 90s when scientific evidence began to show that HIV was a chronic, manageable illness (much like diabetes) rather than a universally life-threatening condition, and that an HIV+ person can have almost normal life expectancy if they have access to proper healthcare, medication and adhere to their treatment protocols.  “Hollard was the first to offer life, critical illness and disability cover in 1999 and, from the start our approach has been to provide HIV+ clients with cover that has no exclusions based on their HIV status,” says Hollard Life’s Head of Underwriting, Hayley Taylor.  “As our understanding of the disease has grown, it’s become clearer and clearer that there’s comprehensive and affordable insurance available

for HIV+ clients, as long as they are managing their healthcare appropriately,” she says. “That’s borne out by Hollard’s underwriting statistics, which show that clients with well-managed HIV+ often attract premiums that are significantly lower than those for other chronic health issues, such as heart disease or diabetes.” However, perhaps the most compelling evidence is that, in the 18 years Hollard has offered insurance to HIV+ clients, they’ve only had two claims lodged.   In recent years, with more research by reinsurers supporting this trend, the broader insurance industry has come on board, which is great news, says Taylor, but as price, benefits, exclusions, compliance requirements and waiting periods can vary significantly, she recommends HIV+ clients bear the following in mind when weighing up the best cover to meet their needs: • A precondition for some insurers will be strict adherence to an Antiretroviral (ARV) programme • Some policies require Proof of Ongoing Compliance (to verify adherence to an ARV

programme) and you may be expected to bear the cost of this • Cover periods can vary but it is preferable to take cover that extends for your lifetime. If it is only offered for a fixed period, in time you will be required to reapply and at which stage you would pay for premiums appropriate to an older you and your health may have deteriorated – which means higher premium costs  • Every insurance company offers different features and benefits and it is always best to consult with an experienced financial adviser who is familiar with each product and can guide you through their respective conditions.  

Hayley Taylor, Head of Underwriting, Hollard Life


BOOKS ETCETERA

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BOOKS ETCETERA

EDITOR’S BOOKSHELF

28 February 2018

SUDOKU ENTER NUMBERS INTO THE BLANK SPACES SO THAT EACH ROW, COLUMN AND 3X3 BOX CONTAIN THE NUMBERS 1 TO 9.

RAMAPHOSA: THE MAN WHO WOULD BE KING BY RAY HARTLEY As founder of the powerful National Union of Mineworkers, as the architect of South Africa’s much lauded postapartheid Constitution and as the first major player in black economic empowerment, newly elected ANC President and the country’s Deputy President, Cyril Ramaphosa, ticks all the right boxes. But, when striking workers were gunned down by police at Marikana in 2012 – in possibly the worst tragedy of the democratic era, Ramaphosa was no longer at their side. He was a wealthy businessman sitting on the board of the mining house they were protesting against. And when South Africans – including several prominent members of the ruling ANC – openly rebelled against President Jacob Zuma’s corruption and his failure to adhere to his constitutional obligations, Ramaphosa remained strangely silent, staying at Zuma’s side. When he finally began to speak out against the capture of the state by Zuma’s cronies, some said he had left it far too late. At the time, his growing band of supporters within the ruling party said he was executing a canny strategy to seize power as an insider. Author and seasoned journalist, Ray Hartley, has tracked Ramaphosa’s rise closely for more than two decades. He examines Ramaphosa’s dramatic political life in an effort to answer the questions: Who is Ramaphosa and is he the man to fix SA?

HEARTBREAKER: CHRISTIAAN BARNARD AND THE FIRST HEART TRANSPLANT BY JAMES STYAN In this new biography of Chris Barnard, we learn about the life of South Africa’s most famous surgeon, from his Beaufort West childhood through his studies locally and abroad to his prominent marriages – and divorces. Author, James Styan, also examines the impact of the historic heart transplant on Barnard’s personal life and South African society at large, where apartheid legislation often made the difficulties of medicine even more convoluted. The role of black medical staff like Hamilton Naki is explored, as is the intense rivalry that arose between other famous heart surgeons and Barnard. How did Barnard manage to beat them all in this race of life and death? How much did his famous charisma have to do with it all? And in the light of his later years, his subsequent successes and considerable failures, what is Barnard’s legacy today? Styan covers it all in this fascinating new account.

Berlin tops for real estate investment

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amed the top European market for Real Estate Investment by PwC and the Urban Land Institute for 2016, 2017 and most recently 2018, Berlin is a city brimming with possibility. Recognised for investment, development and prospects for rental and capital growth, Berlin has grown into a magnetic global city – behind only London and Paris as Europe’s top city for both tourism and education. “Berlin has outperformed Germany’s GDP growth for years, presenting a striking case for investment,” says Ian Sigmund, Investment Manager, IP Global.  “The city is at the heart of the country’s reputation for innovation and a solid workforce, thanks to the lowest unemployment rates in 25 years all contributing to a healthy economy still on its way up.” Sigmund describes Berlin as a mecca

for Millennials, so buy-to-let investors should take note. The city offers free education and its universities and colleges attract more students than anywhere else in the country. “Berlin is widely recognised as a great place to study thanks to a high quality of education delivered by world-class institutions,” he says. The prestigious Humboldt University of Berlin has produced an impressive 29 Nobel laureates. Berlin is Germany’s centre of government, media, science, technology and culture. The city has also managed to keep its unique history and urban identity while forging forward as a global capital. “Overwhelmingly positive indications mean we foresee this youthful city’s growth continuing into the future and for investors, now is the time to get involved,” says Sigmund.

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IF IT’S NOT BONITAS, IT’S NOT MEDICAL AID WINNER OF: 2017/2018 KASI STAR BRAND AWARD 2017/2018 ICON BRANDS AWARD 2017/2018 ASK AFRIKA ORANGE INDEX AWARD FOR SERVICE EXCELLENCE


Sasfin Wealth offers you one asset classthe world. There is only one thing we value above performance – our relationships. With a legacy dating back to 1890, our experience in delivering long-term returns, and protecting and growing our clients’ wealth, stems from our belief in offering you a single asset class – the world. sasfin.com/globalwealth | 0861 SASFIN

Sasfin Wealth comprises Sasfin Securities (Pty) Ltd, JSE member and NCA credit provider – NCRCP 2139; Sasfin Asset Managers (Pty) Ltd, FSP No. 21664 and Sasfin Financial Advisory Services (Pty) Ltd, FSP No. 5711. This advert is general in nature and is not advice. Sasfin Wealth accepts no liability for errors or changes. All data and examples are given as indicators only and are not guaranteed unless confirmed in writing. Past performance is not necessarily indicative of future performance. As clients are responsible for their decisions, they should obtain independent advice before taking any action.

Money Marketing February 2018  

MoneyMarketing’s February issue looks at how to make the most of tax-free investing. It also includes an employee benefits feature as well a...

Money Marketing February 2018  

MoneyMarketing’s February issue looks at how to make the most of tax-free investing. It also includes an employee benefits feature as well a...