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31 January 2018 |

First for the professional personal financial adviser


SHOULD YOU BE INVESTING LOCALLY? The only necessary certainty in investing is diversification.

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How FAs can curb clients’ irrational behaviour



It is important to filter out the ‘noise’ and focus on the info you really need.

Many businesses are at risk of having their insurance claims denied in the event of fire damage. Page 28

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inancial advisers are often bothered by their clients’ irrational behaviour and there’s been no way of stopping this behaviour – until now. A new study by researchers at Italy’s University of Calabria has concluded that investors significantly increase returns upon being reminded of the all-too-human tendency to behave irrationally. The university ran a field experiment, involving almost 200 students who were enrolled in a financial trading course at an Italian University. These students were invited to trade on Borsa Italiana’s virtual platform. Some students in the study received a reminder by text message, stating: “We take this opportunity to remind you that individuals are affected by some behavioural biases when trading and these biases may reduce the performance of their portfolio.” Over a five-week period, these students did 1.8 percentage points better than those who did not receive the SMS reminder. The researchers say that this is impressive for such a short time period, as well as significant, according to traditional statistical standards.

The study’s foundation is that people are not fully rational and thus their decisions might be at least partially driven by behavioural biases. “The relevance of these biases in financial decisions has long been recognised. While traditional theories are based on the assumption that investors act in a rational manner, more recent approaches consider that investors face several cognitive and psychological errors. “A number of empirical papers show that investors suffer from overreaction, reference point thinking, loss aversion, overconfidence, home bias, and limited attention.” According to the researchers, even if biases and heuristics can help to make decisions in some particular circumstances, for instance when a more comprehensive and careful decision-making process is not possible, in other circumstances they can determine inefficient choices. A number of papers show that limitations in attention, memory and self-control can bring individuals to undertake choices that are against their long-run self-interest. Continued on page 2

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31 January 2018


Continued from page 1

For instance, in the domain of financial decisions, it has been shown that overconfidence leads to excessive trading with negative consequences on returns (when transaction costs are considered). In the same way, home bias can lead investors to ignore profitable investment opportunities that involve foreign companies. The existence of these behavioural biases motivates interventions that target such biases, the researchers say. Among these interventions, special attention has recently been devoted to ‘nudging’, that is the implementation of policies aimed at altering people’s behaviour in a predictable way without forbidding any options or significantly changing economic incentives. ‘Nudging’ includes a number of different tools such as defaults, easy access to information, and reminders. The appeal of ‘nudges’ is partially due to the fact that they can be implemented at relatively low cost and there is also evidence that these policies are effective in changing decisions. “Our results confirm findings emerging from the existing literature, showing that even individuals with good financial education and who are aware of behavioural biases, undertake financial decisions that can be hardly explained by theories based on full rationality.

THE APPEAL OF ‘NUDGES’ IS PARTIALLY DUE TO THE FACT THAT THEY CAN BE IMPLEMENTED AT RELATIVELY LOW COST More importantly, the findings show that simple reminder messages reinforcing information that individuals already have can positively affect financial choices and increase portfolio returns. “This evidence supports the idea that when taking decisions individuals tend to not consider all the information they have and that calling their attention to relevant aspects can improve their decision-making.” What does all this mean for financial advisers? The study by the University of Calabria suggests that financial advisers should prioritise regular contact with their clients in order to ‘nudge’ them into making the right investment decisions. And as the study shows, messages needn’t be lengthy to be effective.


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reparing a January issue for publication hasn’t been a problem – until now. As I write, the ANC’s elective conference hasn’t yet taken place. I have absolutely no idea of the outcome. Nevertheless, a downgrade has arrived. While most had been expecting it, some were still optimistic that ratings agencies wouldn’t move until the elective conference had taken place. No such luck – S&P Global decided that it could not delay. At the end of November, it downgraded the South African long‐term local currency sovereign credit rating to sub-investment grade BB+ (stable outlook) from BBB‐ and the long‐term foreign currency sovereign credit rating to BB (stable outlook) from BB‐. While Moody’s left its ratings at Baa3, it placed them on review for a downgrade. Our government hasn’t done much to show ratings agencies that it’s attempting to take any corrective action on the economy. Instead, it has engaged in political manoeuvrings designed to push through decisions that have little to do with the best interests of South Africa, most notably the nuclear deal that most intelligent people deem to be totally unnecessary and unaffordable. In its immediate response to the S&P downgrade, the government pointed out that the Presidential Fiscal Committee – set up in September – had been tasked with restoring business confidence in the immediate term and executing growth-enhancing measures previously announced. These are usually tasks carried out by the Treasury itself. By their actions, the ratings agencies have implied – and rightly so – that this bizarre Presidential Fiscal Committee isn’t to be taken seriously. As I write, the future is bleak – but not yet beyond repair. If by the time you read this, Nkosazana Clarice Dlamini-Zuma is leading the ruling party, all I can say is: Wait for the 2019 national elections in which the ANC will lose its majority vote! On behalf of the MoneyMarketing team, I wish you a happy New Year. Janice @MMMagza ERRATUM In MoneyMarketing’s December 2017 issue, Tinyiko Ngwenya was inadvertently named as an Economist at Old Mutual Multi-Managers when she is in fact an Economist at Old Mutual Investment Group. We apologise for the error and for any inconvenience caused.

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31 January 2018


How did you become involved in financial services; was it something you always wanted to do? At school in Grade 10, I decided that I wanted to work for a big financial services company – without knowing exactly what position I wanted to fill. I was advised to complete a BCom (Law) and to follow that with a Bachelor of Laws (LLB) degree. Apparently, that would then give me the opportunity to hold many different jobs within a financial services company. I did exactly that and have enjoyed the various positions that I have held in the past 30 years in the financial services sector. A number of recent surveys show that most South Africans are not financially well. To what can this be attributed? Momentum has been researching financial wellness and has released the Momentum Unisa Household Financial Wellness Index for the past six years. During this process, we identified many things that people do that directly have a negative influence on their financial wellness. We realised that just naming the list of things people do wrong would not necessarily change their behaviour – people need to change the way they see things. We discovered that all people who are financially well have the following in common: • They partner with a financial adviser • They have a detailed financial plan • They have a budget • They regularly engage with their plan and budget.


The financial planning industry is currently facing some challenges (for example, regulation, client expectations, etc). How do you think these challenges should be addressed? As a business, we have supported a number of regulatory changes during the past few years as these changes were to the benefit of the industry and also ensured better client outcomes as a result of improved processes and products that provide clients with value for money solutions. We are currently in the process of understanding the implications of the Retail Distribution Review (RDR) and although there remains a lot of uncertainty, we need to ensure that we are appropriately positioned in order to adapt our business to the changes required in terms of this legislation. We are confident that we have created a unique solution and approach to enable our financial advisers and clients to adapt to the potential changes in a post-RDR environment. In order to gain a better understanding of our clients, we used our active participation in and sponsorship of the Momentum Unisa Household Financial Wellness Index to develop the Financial Wellness Framework. The Financial Wellness Framework is a tool that speaks to the solutions and products required by our clients in order for them to achieve their financial goals. Our financial planners will recommend appropriate solutions based on clients’ needs according to the Financial Wellness Framework - and once implemented, clients will be protected from things beyond their control and will be able to provide for things that they can control. As a business, Momentum’s strategy is based on client engagement and to support this we instil a culture not only of client-centricity but also of client obsession. We do not only talk about clientcentricity, we live these values and those of financial wellness through the behaviour of our financial planners and staff. Through our financial planners, we have managed to truly engage clients with their financial plans and this has gone a long way in meeting clients’ expectations.

UPS & DOWNS Last month, digital currency Bitcoin hit a new high of $11 826.76 per coin. This came amid continued interest in the crypto-currency from not only retail investors, but institutions too. Exchange operator Nasdaq has indicated that it may follow the CME Group by introducing Bitcoin future contracts this year. Also last month, Britain’s Telegraph newspaper reported that the twin brothers who sued Mark Zuckerberg – claiming he stole their idea for Facebook – are worth more than $1bn after capitalising on the astonishing rise in Bitcoin.

“An $11m bet on Bitcoin made by Tyler and Cameron Winklevoss over four years ago has ballooned by almost 10 000%. It is believed to be the first billiondollar return made by a cryptocurrency investor, a landmark moment for the controversial asset.”

Losses at South African Airways (SAA) are expected to increase to R4bn in 2017/18 – up from a previous estimate of R2.8bn. This is according to the airline’s Chief Financial Officer, Phumeza Nhantsi, who told Parliament’s finance committee that these higher projected losses were due to the retirement of five leased narrowbody aircraft.

This means that flights have been cancelled and planes grounded. SAA has made it clear that even with a government injection of R10bn, the embattled airline will remain undercapitalised with a negative equity position of over R9bn.

Godfrey Nti, Chief Executive Officer at the Financial Planning Institute of Southern Africa (FPI), has been appointed as Chairperson of the Financial Planning Standards Board (FPSB)’s Chief Executives Committee (CEC), effective January 2018. Nti will work with the FPSB’s chief executives from the other 25 FPSB member organisations, and in particular those from the top seven financially contributing member organisations to shape issues and recommendations for consideration by the FPSB’s Board of Directors. During his tenure, Nti will supervise the business of the CEC, report regularly on CEC activities to the FPSB Board and FPSB Council. Nti will also serve ex officio on the FPSB’s Member Advisory Group to assess the CEC’s performance and implement actions to improve performance where necessary. RisCura has won the Africa Global Funds (AGF) 2017 Service Provider Awards in the Best Advisory Provider: Private Equity Category, for the second consecutive year. RisCura provides investment decision support and offers a wide range of services to the continent’s investor base in listed and unlisted investments. The awards were established by AGF in partnership with the Southern Africa Venture Capital Association (SAVCA). These are the only international awards dedicated to celebrating excellence in African fund services. “We are delighted to have been voted the best advisory service provider in private equity for the second year in a row, demonstrating our continued dedication to providing our clients with a range of specialised services,” said Heleen Goussard, Head of Independent Valuations at RisCura. Global real estate fintech platform Wealth Migrate is launching a WealthE™ Coin. Scott Picken, Founder, and CEO of Wealth Migrate said: “We aim to create a crypto currency that is based on real estate. In conjunction with gamification, game theory and blockchain, this is going to have a catalytic impact on our global wealth ecosystem and investor experience, giving our investors additional opportunities to increase their investment returns and be the catalyst in enabling us further to empower a billion people by 2020 in global real estate investing.” Global Credit Ratings (GCR) has confirmed the national credit fund rating it gave to the Sanlam Investment Management (SIM) Enhanced Yield Fund as AA-(ZA)(f), with an outlook of stable. According to GCR, “the SIM Enhanced Yield Fund has met its performance objectives over the past three years and also since inception, while the volatility over one, three and five year time horizons is assessed as moderate. The growth in assets under management has been strong over the past three years, highlighting the appropriateness of the fund’s mandate and execution in meeting investor requirements.”


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31 January 2018

Setting up a trust


etting up a trust requires careful evaluation and sound financial advice. People set up trusts for different reasons. Trusts, like good financial solutions, have unique properties, which can help you meet your goals. However, if not set up properly they can be a hindrance to your plans and ultimately a disaster. Before setting up a trust, answer three important questions with the help of a qualified financial There is a misconception that trusts eliminate or planner, says Floris Slabbert, Country Manager at at least reduce tax burdens. Beware that they can do Ecsponent Financial Services: the opposite and create additional tax liabilities if not • What is the purpose of the trust? structured properly. In this instance, the help of a tax • What assets do you want to incorporate and how expert is invaluable. SARS will always try to maximise will you do it? revenue. Hence, legislation can change unexpectedly • What is more appropriate – a living (interto close so-called ‘tax-bleeding’ holes,” warns Slabbert. vivos) trust or a testamentary trust? If it is a There is a lot of red tape. “As a start, everyone ‘legacy-planning’ situation, a testamentary trust involved must comply with FICA requirements. (established after death) may be more appropriate In the case of living trusts, trustees must conduct than a living trust. themselves in a way that shows they are responsible, Slabbert explains the intricacies involved when involved and present at general meetings. Trusts are working through the third question: “Legacy planning subject to increased scrutiny from tax practitioners is where a person prepares a financial strategy, usually and even beneficiaries do not hesitate to challenge a with the help of a financial adviser, to trust or trustee in court.” bequeath his or her assets to next of Despite the legislation that prescribes kin of a loved one after death. A TRUST SHOULD the governance of trusts, many people, “A living trust is a legal document ONLY BE CREATED says Slabbert, misunderstand the created during a person’s lifetime. financial implications of transferring WITH THE HELP Just like a will, a living trust spells out ownership of an asset to a trust. The exactly what your desires are with legislation is complicated and changed OF AN EXPERT regard to your assets, your dependents, recently, putting trust-held assets at risk. and your heirs.” The big difference, explains Slabbert, is For example, legislation governing business property that a will becomes effective only after you die and your trusts was changed from 1 March 2017. Among other will has been submitted to the Master. chances, it entails that a business trust can no longer He adds: “A testamentary trust is established accept interest-free loans. This makes it more expensive through the provisions of a last will and testament. to buy property via these trusts as the minimum These provisions stipulate the details about how a prescribed interest rate is now repo rate plus 1%. person’s assets must be divided and distributed. This Also take note of how the lender’s death affects a often includes the proceeds from insurance policies in trust. Without enough life cover to deal with the fees respect of the life of the deceased. One will may have and taxes, the trust will have to recover those fees to more than one testamentary trust per will.” pay the estate. Once it becomes clear that it is necessary to “Ideally, the trust should be the beneficiary of life establish a trust, you need to consider a host of cover on the donor(s) life,” advises Slabbert. “This factors. These range from tax implications – both puts the trust in a position where it can redeem the present and future – legislation, death and intricacies loan account. If the trust then does not deduct the life unique to the management of trusts. Make sure cover premiums over the course of the lender’s life, it you understand the purpose of your trust and the will not pay taxes when the policy pays out. Yet, at the responsibility of a trustee. very end, your estate will end up donating the funds

received from the trust, back to your trust, which then incurs estate duty above the normal abatement.” A donation to a trust will immediately be taxed at 20% if it exceeds R100 000 per year and is payable within three months of the donation taking place. If the donor doesn’t pay the donations tax, the trust has to pay it within ninety days. If not done, SARS will charge interest to both parties. A trust can bring burdens, but also save a lot of money, while operating within legal bounds, if one knows how. “A business property trust, for example, can reduce expensive property transfer duties and bond registration costs when the company’s shareholding, under the trust, is sold to a buyer,” says Slabbert. If the purpose of your trust is to make provision for your children, it would be more beneficial to have a trust ‘mortis causa’, after you pass away, he advises. “This allows for significant tax abatements, which are capped at R3.5 m and double that between spouses. These abatements would be forfeited if you set up a trust now and donated your assets to the entity. “In addition, living trusts limit your beneficiaries who have to act within the laws of the trust. They might find themselves in financial trouble, forcing them to sell off trust assets for livelihood. In such a case, a mortis causa would be more useful, as it dissolves after certain objectives are met or after a certain time.” Ultimately, says Slabbert, a trust should only be created with the help of an expert, for the specific benefit of your beneficiaries. If not, a trust can become a tax and financial burden on everyone involved.

Floris Slabbert, Country Manager, Ecsponent Financial Services


31 January 2018

With the passing of the Financial Sector Regulation Act (FSR) into law, setting the stage for the Financial Services Board (FSB)’s transition to the Financial Sector Conduct Authority, Dube Tshidi, the FSB’s Executive Officer shares his views on the transition and the imminent winding down of the FSB. He outlines current and future priorities and the steps being undertaken to ensure a smooth transition.


he passing of the Financial Sector Regulation Act (FSRA), which introduces the Twin Peaks regulatory system, is a major milestone not only for the FSB, but also for the country and specifically the financial services sector and its consumers. It is a particularly progressive move for consumers of financial services and products in a sense that the Financial Sector Conduct Authority (FSCA)’s mandate focuses on conduct issues of all financial sector institutions. This broadens our scope and it means that consumers of certain financial products or services previously falling outside of the FSB’s mandate – for example, retail banking services – will now be protected by the new authority. Naysayers are of the opinion that, in essence, the FSCA will still be the FSB, just with a different title and renamed portfolios – but the reality is that the mandate of the new entity will be much wider than that of the FSB.  Whilst in some cases there may not be, on the face of it, a significant difference, the scope is significantly broader with a much wider reach. It is not just the jurisdiction of the FSCA that changes: the FSR Act also dictates a shift in approach, requiring the conduct Regulator to be more pro-active and pre-emptive. In order to do this the Regulator will need to be highly data-enabled with strong research capabilities, requiring the recruitment of a different skill set to ensure that we move forward and shift our approach to meet these objectives. Internally, the organisation is being restructured to be more functionallyfocused as opposed to its current sectoral approach. This will enable a much greater degree of consistency across industries. 

As we will have virtually no prudential responsibilities, we will sharpen our focus on market conduct issues to a much greater extent than was previously possible. While the Act has been subject to criticism, as there always will be when major change is introduced, it cannot be forgotten that Parliament went through an extensive consultative process and considered many views in processing the Bill. Issues around regulatory costs and the necessity of the dual regulatory system were raised and addressed by the National Treasury through a cost-benefit study. It should also not be overlooked, and it is important to state again, that the negative impact on the financial system, economy and consumers associated with the failure of financial institutions, as experienced as a result of the 2008 global financial crisis, necessitates regulatory reforms to close gaps and ensure that entities are comprehensively regulated. While this will lead to some increases in regulatory cost, it is deemed necessary, and we will closely monitor these to ensure they are in line with industry norms.  Leading on from this, the Act will be implemented in phases to ensure a combination of minimal disruption to the industry and maximum understanding and consensus. Through our existing Twin Peaks forums, we are engaging with the industry to ensure that they are kept up-to-date with the implementation process, and we have been hosting multi-stakeholder dialogue sessions through various media platforms to ensure that all stakeholders are kept abreast. The next step will be to officially launch our strategy and the new brand this year.

But this cannot be a quick process for the sake of speed alone. We have identified immediate priorities to transition the FSB to the FSCA. With regards to the process following the enactment of the Bill, it is estimated that a period of at least six to eight months will be required before it can be fully implemented. The Minister is empowered to provide for different dates of effectiveness for provisions of the Act. For the Financial Sector Conduct Authority to be established, the Act states that the Minister must follow a process of appointing a Commissioner and Deputy Commissioners. To that end, draft regulations setting out the process will be published for public comment. Internally, we will continue with our regular and repeated engagement with all staff members to ensure a seamless transition and to finalise internal reorganisation.   This process also ensures smooth transition to the FSCA for cases or investigations that are currently before the FSB. The FSR Act specifically provides for the possibility that supervisory issues or legal proceedings may not be finalised, and deals with the process of how such pending cases should be dealt with. The Act also specifies that all rights and obligations of the FSB will pass to the FSCA. 

Dube Tshidi, the FSB’s Executive Officer

Has the world’s first AI financial adviser been launched? Pefin, a financial technology company based in New York City, claims to have launched the world’s first Artificial Intelligence (AI) financial adviser. In a statement last month, it said the platform offers longterm financial planning services, financial advice, including savings and debt management strategies, investment advice and portfolio management services, as well as real-time monitoring, updates, and curated financial literacy

content for each user. Pefin claims that it takes into account each user’s current financial situation and future plans, “incorporating their financial behaviour to offer comprehensive advice. Individuals and families link financial information such as their credit card and checking accounts, debt, investments, and retirement plans to the platform.” Financial planning and advice is available to the first

100 000 customers for the subscription price of $10 a month; a 33% discount to the regular subscription price of $15 a month. Investment advice and portfolio management services are offered by Pefin Advisors, an SEC regulated subsidiary of Pefin. There is no required minimum investment size, and fees are 0.25% of assets under management, with the first $5 000 managed for free. Pefin’s Founder Ramya Joseph, is

a former Wall Street executive who says that Pefin was born out of a recognition that, “something had to change in the way financial advice was being delivered to people.”

Pefin’s Founder, Ramya Joseph


Transition: the challenges and opportunities



31 January 2018

Considerations for a postRDR world: Setting your fees


s the various phases of Retail Distribution Review (RDR) unfold over the next two years, intermediaries need to start positioning themselves appropriately for a new ‘advice fee’ world. Successfully making the shift from commission-only to fee-based charging – and building a sustainable practice in the process – requires careful research and planning. In particular, when deciding on fees, brokers need to find the balance between profitability and offering value, cost-effectively, to their clients. Jacques Coetzer, General Manager, Sanlam Personal Finance, Broker Distribution, says with multiple market factors at play, value needs to be carefully calculated. “Clients will quickly look elsewhere if they feel that you are charging too much and not giving them fair value.”   To find a realistic benchmark to work from, talking to clients about their expectations and doing research into more-or-less what other practices are charging can be useful. This will give you a good foundation from which to determine appropriate pricing.  So what are the structures within the RDR proposal in terms of services intermediaries can render and charge for? The first is the advice process. This involves conducting a financial needs analysis, constructing a financial plan and making recommendations based on a clients’ priorities. There are various ways to structures your fees – a retainer, charging per hour, or charging a project fee per service needed, among others, each of which have their own pitfalls and benefits. There is also an option to introduce different ‘packages’ which suits the needs of different types of clients, and charging per package. The fee charged for advice may be agreed to between the intermediary and the client. Then secondly, there is the implementation of this advice – in other words, buying the products recommended from the selected product provider. The future dispensation will still have commission on life and risk, but not for savings and investment products. Then there are the activities intermediaries render on behalf of the provider, for which a service fee can be charged. Coetzer says that South Africa implementing RDR some years after the UK has allowed us to learn from the mistakes made in that country. “One common mistake is not charging for stage one, the initial needs assessment and plan, which can be a noteworthy loss. Often the broker tries to recoup this fee by hiking up prices on products which can lead to the products being over-priced.”  He says that in order to the get pricing right at each phase, brokers should consider these elements during the process of setting their fee:



Get a very firm grip on your business costs Have a very precise idea of, for example, the costs of your office space, petrol to see clients, personal assistant’s salary, catering bill, electricity bill and taxes. A well run business pays attention to all of these things so you are able to be realistic about profits.


Differentiate yourself through your value proposition Ultimately charging a fee means that clients need to understand and be willing to pay for the value you offer. Be precise about what you offer, and package it in a way that is useful and attractive to clients. In addition, different clients will be able to afford different levels of service. There could thus be advantages to delivering your value proposition in different packages, and charging accordingly.


Get your invoicing systems in place Invoicing, collecting and contracting are vital to keeping your business afloat. There needs to be an upfront contract stipulating the terms of the client and intermediary agreement. In the past, the insurance provider handled the entire process, including fee collection and the legal ramifications of clients defaulting on payments. Now, this will be up to the intermediary, which presents an opportunity for a closer relationship with a client.



Consider investing in a good accountant from the outset Handing over the financial management of your company to someone else will allow you to focus on your core skills of giving financial advice to clients. They can take care of profitability and advise on pricing models, cash flow and taxes, among other things.


The key is to start planning ahead. If you haven’t done so already, it may be worth spending some time dedicated to upfront planning and research, which can benefit you greatly in the long run.

How will you handle the admin in terms of collections and invoicing? Have a clear plan in place for handling defaulting clients. Avoid this scenario by having legal contracts in place. Look for ways to ensure regular income to help cash flow and ensure costs can be covered Risk products which still see intermediaries earn a specified commission upfront and the rest paid out over the policy term or an ongoing retainer can secure a certain level of service on a monthly basis. If you opt for the retainer route, make sure you clearly define what is included on the retainer and what is not. This will help you avoid spending time doing things you are not compensated for, which can make the retainer unprofitable. Also review your fee on an annual basis, which will also give you an opportunity to revisit your services offered.

Jacques Coetzer, General Manager, Sanlam Personal Finance, Broker Distribution


31 January 2018

Richard’s top compliance tips for 2018



ere are some pointers to keep in mind this year that could steer you away from compliance risk in your business.


Seek professional support It never ceases to amaze me that financial services providers pay good money for lawyers and accountants and then head for the bargain basement for a compliance officer to guide them on regulatory compliance. Compliance is a profession and you should seek out a professional for advice. Most are members of the Compliance Institute of South Africa (www. and this should be one of your first ports of call when you are looking for compliance assistance. Additionally, check the FSB website to ensure that compliance officers or compliance firms are indeed licensed by the FSB to provide services that they may describe in their marketing literature.


Re-cap RDR While the RDR may certainly appear intimidating at first glance, it is important that all stakeholders in the financial services industry find time to understand and stay up-to-date with developments. As I write this tip (early December 2017), we are expecting a further updated roadmap to the RDR process, which will hopefully address the meatier issues.


Conditional love All FSB licences are issued with a number of conditions. One of the more important is Condition 1, which requires licensed entities to keep their details

The dos and don’ts of passing down your practice


ypically, when the owner of a financial advisory practice wishes to retire, he/she is faced with one of two choices: Sell the firm or bring in a junior partner. “Ideally, firm owners prefer to transition their book of business to a junior partner over a five- to 10year period. However, throughout my career helping small business owners transfer ownership of their firm and retire, I have found that financial planners ironically have some of the worst track records when it comes to successfully planning and executing an ownership transfer,” says Stephen Brubaker, President and Wealth Management Adviser at Exit & Retirement Strategies, Inc., in Colorado in the US.

up-to-date. The Regulator has in effect lost patience with firms that are seemingly lax in keeping details up-to-date and they could receive some form of administrative penalty.

we are required to report to the Regulator. Conduct of business reports, which are already a reality for insurers, are likely to come out into the wider community from 2019. Watch this space.





Familiarity with foreign funds Section 65 of the Collective Investment Schemes Act clearly states unless an offshore fund is approved by the FSB, it cannot be solicited to local South African investors. There appears to be some confusion on this point, and I would urge you to enquire as to the regulatory status of any fund that you are presented with for your clients’ consumption. Keep on trend It is important that we all try and stay up-to-date with the developments of technology and how it is impacting financial services. We have all heard of cryptocurrencies such as Bitcoin. I have no doubt that in times to come, the Regulators will create rules and regulations around these and we will probably see central banks supporting a particular cryptocurrency, ensuring that they stay in the loop. Cryptocurrencies may well not be a passing fad.


Tickbox approach is out If you still believe that regulatory compliance involves ticking boxes and not much else, you are in for a rude awakening. Principles and outcomesbased theory kick tick boxes into touch as we move to a conduct-based regulatory regime, and this will likely translate into major changes in the way that

Writing on the American Financial Planning Association’s Practice Management Blog, Brubaker provides a few dos and don’ts when transitioning ownership of the business to a younger partner. Don’t delay. It’s never too early to start the succession planning process, which can take more than a decade from start to finish. “It takes years to introduce a new partner and provide them with the training and resources necessary to keep the business afloat. Too often I see advisers continue to work into their senior years only to realise they have no exit strategy in place. Consider your clients; who is going to take care of them after you leave? And how are you going to monetise the business you’ve worked to build over the course of a lifetime?” Do get your younger partner involved in discussions and meetings with your larger, more significant clients throughout the transition process. “Junior partners are typically brought on initially to handle an adviser’s smaller accounts. While this is all good and well in the beginning, it does not provide the new owner with the proper experience and

Google ‘market conduct risk’ You are advised to ensure that you understand the meaning of market conduct risk and how it affects your business. This will certainly be an area the Regulator continues to spend more time on going forward. I expect to see it fairly near the top, if not at the top, of any risk management plan in 2018.

Don’t try and be clever with numbers A number of FSPs have attempted to be clever insofar as the solvency calculations are concerned, and the FSB has indicated that it intends to take stern action against miscreants in this regard. You are therefore advised to avoid massaging financial statements to meet solvency requirements, as this will certainly lead you into conflict with the Regulator. And, on the same topic, some of the creative reasons for requesting an extension to the deadline that we have been asked to submit, are fantasy in the extreme, and no doubt will be recognised as such by the Regulator. In the event that you wish to apply for an extension to a regulatory deadline, please ensure that a bona fide case is built and submitted to back up your request. Finally, I hope your festive season involved switching off all your work devices for at least a few days, and that you feel relaxed and have come back strong, for it is no doubt going to be a very busy 2018.

training required to serve the bigger clients, which will be one of their primary responsibilities once ownership is transferred.” Don’t forget about the intangibles like the management style, likeability and cultural fit of the new owner. “Some financial advisers still run a very formal shop with pressed white shirts and systemised client communication techniques. Others are more comfortable in khakis and a polo shirt, and prefer a more casual style of correspondence with clients. Also, does your new partner fit in well with other employees at the firm? Making sure you two see eye to eye in these categories can really smooth out the transition process, both for yourself and your clients.” Do go over the company’s financials. “Not only must you teach the new partner how to handle your clients, you must also teach them how to run a business. What size client is most profitable? How does the business manage its costs? How do we manage the staff? Many new business owners overlook these extra responsibilities, which can be overwhelming at first. “But as the outgoing partner,

you need to make sure the business is left in a position to remain profitable. Typically, selling advisers are paid out in instalments. If the business fails, these payments could stop, leaving the outgoing adviser in a sticky situation.” Don’t think you won’t need outside help. Brubaker suggests that a team of lawyers, accountants and even a management consultant be hired to delegate the distribution of responsibilities throughout the process. “Many times the incoming owner wishes to take over more responsibility at a faster pace than the retiring adviser is comfortable with. Management consultants go a long way in easing this tension” he says. Do be open to some degree of change. “Relinquishing your power and watching the business you spent years creating change in front of your eyes can be a difficult pill to swallow. However, standing in the way of the new adviser’s vision will only muddy the process. You must accept that some aspects of your business are going to change under new ownership. The sooner you come to terms with this reality, the better.”




31 January 2018

PIETER HUGO Managing Director, Prudential Unit Trusts


Some investors miss out on 2017’s equity returns

fter three years of disappointing equity returns, the FTSE/JSE All Share Index (ALSI) has delivered a return of 19.6% in 2017 (to the end of October). This improved run has been driven mainly by global factors, including good foreign investor demand for emerging market equities, higher commodity prices that have held up well; and ongoing strong global growth. Global equities have been enjoying a bull run for over six successive quarters now. This has pushed our resources stocks higher, as well as big global counters like Naspers and BAT, for example. Unfortunately, some investors have missed out on this longawaited good performance because they had moved away from equities, unable to tolerate the underperformance. In the past three years, local equities were largely flat, underperforming money market returns and even not beating inflation over two years. The average ASISA General Equity fund returned only -1.1% pa over one year and 1.7% pa over three years (both after fees to 30 June 2017), far less than the average Money Market fund return of 8.7% pa and 7.3% pa respectively.

In turn, this poor equity performance was reflected in the returns of well-diversified multi-asset funds, like balanced funds and low-equity funds that many investors rely on for retirement. The average ASISA low-equity multi-asset fund delivered only 5.8% pa over the three years to 30 June 2017, well below the average 15-year performance of 9.7% pa. The average balanced fund returned only 4.7% pa over three years compared to the 15-year average of 11.9% pa. These long-term performances are in line with the funds’ generally accepted return targets of inflation + 4% for the less aggressive low-equity category, and inflation + 6% for the more aggressive high-equity category (with inflation at 6%).   So investors have been understandably worried about their returns over the past three years. As we know about human behaviour, the longer a period of poor investment performance continues, the greater becomes the urge to ‘do something’ – and unsurprisingly, investors have taken action. The ASISA Q2 and Q3 2017 unit trust industry statistics highlighted a large increase in the number of investors shifting away from funds

PHILIP BRADFORD Head of Investments, Sasfin Wealth


hirty years ago, two rand was worth approximately one US dollar. Currently to buy one US dollar, you need around R13.50. This means that if you had invested R100 000 into US dollars 30 years ago it would now be worth about R675 000; a gain of 575%. So in hindsight it was an obvious decision to take all of your money out of South Africa. Or was it? Unfortunately, as with most things in life, it is not that simple. The above calculation ignores the “eighth wonder of the world”, compound interest. In fact, when including the interest in the two currencies, the US dollar cash investment would now be worth R1 822 000, whilst the rand cash investment would be worth R2 530 000. So am I trying to suggest that you should keep all your money in South Africa? Definitely not. However, when someone makes such an important decision with their life savings, it is important to consider the facts:

with equity exposure, in favour of cash. These investors would have now missed out on some of 2017’s excellent equity returns, mainly recorded since June. We at Prudential have been warning against switching for some time now, since asset valuations have been showing that prospective returns from multi-asset funds are higher than those from cash assets. Helped by the equity run, the average balanced fund has now returned 12.7% over 12 months and 7.6% pa over three years (to 31 October). And the Prudential Balanced Fund has significantly outperformed this with 15.5% and 9.1% pa respectively, ranking in the top quartile of its ASISA category over all annual periods from one- to 10-years to the end of October. Since no one can predict the short-term ups and downs of equity markets, investors need to stay invested to benefit from the upturns to meet their longer-term retirement goals. Fund managers, meanwhile, have perfected their investment processes over many years with the goal of overcoming investment volatility and meeting each fund’s investment objective over its specified investment horizon. Investors need to take a longer-term view and trust that fund performance will recover as markets do.

Should you be investing locally?

‘Africa is not for sissies’ From a risk perspective it doesn’t make sense to leave all your wealth in one country, even if it doesn’t have the political and economic volatility that we experience. The only necessary certainty in investing is diversification. It has nothing to do with patriotism; it is simply prudent to diversify across a variety of investments, currencies, companies and countries. ‘The world is your oyster’ When it comes to investing in shares, why limit yourself to one local company if you could rather buy shares in some of the best companies in the world? The world is filled with opportunities and investors are now able to easily invest in a large variety of investments across the globe. This is particularly true of stock markets where it is now easy for our clients to access the biggest and best companies in the world from one account. In the past if you wanted to invest in oil, luxury goods and beverages

you could only really buy Sasol, Richemont and SABMiller. Now you can also consider alternatives like Shell, LVMH (Louis Vuitton - Moët Hennessy) or Diageo. These global leaders are not only accessible, but are often cheaper than local alternatives. There are also industries and related companies that are not available in South Africa. Companies such as Google, Amazon, Microsoft and Apple don’t have peers on the JSE. These are some of the most valuable companies in the world and should be considered by any investor. In addition, the companies that are listed on the JSE are ever more expanding their operations internationally. It is estimated that more than 70% of the earnings of companies listed on the JSE are international. This means that even a ‘local’ investment on the JSE is mostly ‘offshore’. Home town advantage There is, however, one advantage that South Africa

has over first world countries which is ironically as a result of our relatively high inflation and political and economic uncertainty: high interest rates. Swiss investors that earn negative interest on their cash are envious of our local bond interest rates of over 8%. Local listed property companies can also offer good yields and better growth compared to foreign property equivalents. This is mainly because the local lease increments are linked to inflation which is much higher than in the developed markets. Therefore carefully selected local property companies can offer very attractive yields. In conclusion, it makes sense for South African investors to invest a portion of their assets in local bonds and property when income is required, where returns of over 10% are currently possible. However, when looking for capital growth they should invest in the best companies and industries in the world.

How to Invest in times of political uncertainty We live in a world characterised by volatility, uncertainty, complexity and ambiguity (VUCA) caused mainly by political uncertainty.

Investing in markets always comes with some risk. The secret is in knowing how to manage the risks so as to earn your targeted return.

Current specific political events give investors the jitters. It’s at times like these that investors often alter their investments. Some will do so through well-informed decisions. However, others do so out of fear and this has proven to destroy value.

From 1900 to the present1

In addition there are: ■ Geopolitical concerns regarding North Korea and the US ■ Risk of faltering global economic growth ■ Potentially negative effects of populist policies in many countries ■ Expensive valuations of global and local stock markets. ■ The list goes on...

South Africa has been witness to many crises: Effects of World War I and World War II

The Great Depression in 1930s

PW Botha’s Rubicon speech of the 80’s

The Global Financial Crisis of 2008

South African investors are confronted with risks related to the change in leadership that took place at the African National Congress elective conference in December. It is also facing ongoing credit rating downgrades.

What is fruitful is to recall that economies are cyclical.

As such investors are worried. But worry, while overwhelming, can be unfruitful.

Our investment portfolios have been built to be robust and well positioned to deal with risk. We have: Invested in companies that earn a large portion of their profits overseas which provides protection against rand depreciation

Even with these crises South Africa delivered the best equity market return after inflation, beating countries like Australia and the US.

Therefore, during times of heightened risks an investment approach that focuses on investors’ objectives is critical. We call this approach Living*Investing. Living*Investing is a risk-led, forward-thinking investment approach aimed at achieving client objectives with a greater degree of certainty.

So, while political uncertainty remains in South Africa, we need to remember that there are periods of contraction (recession) in our economy and there will be periods of recovery (growth). The way to protect against political risk is to stay invested without taking money out of markets in response to volatility.


Source: Credit Suisse, Annual Global Investment Returns Year Book

Alexander Forbes Investments Holdings Limited. Registration number 1997/022540/06

Maximum offshore allocation (25%)

Built portfolios to include multiple asset classes, strategies and asset managers

Exposed the portfolios to fixed-income assets (like bonds) with Added alternative shorter maturities assets such as hedge which helps in funds and private minimising interest markets. This provides rate risks greater diversification in the portfolios

The secret is to stay diversified, focused on the long term and adopt the Living*Investing approach to investments.



ANTHONY KATAKUZINOS Chief Operating Officer, STANLIB Retail


nowing how the time horizon of different types of investments affects savings outcomes can help investors choose the most appropriate investment vehicle to earn the best possible growth over time. The savings levels of working South Africans are low at just 15% of their income. But according to research on the South African market released last year, savings for the entire population is even lower at just 3%. Investors often choose bank fixed deposit accounts and money market funds as both benefit from set interest rates and provide fairly easy access to savings. Average 12-month interest rates for fixed deposit accounts from South Africa’s four biggest banks are currently around 6% to 8%. Average money market rates are around 7.5% to 8.5%. With money market funds, investors can get access to their money within 24 hours, which is a significant benefit. By choosing to ‘move up the yield curve’, which means investing in fixed income funds, investors can get average returns of between 8% and 9.5%, immediately adding almost 2% extra in returns while keeping within a low-risk investment. What’s more is investors still having access to their funds within 48 hours, which is a major benefit.

Income funds (from low risk to more aggressive) sit on the conservative side of the efficient frontier risk spectrum. An efficient frontier simply shows the opportunity to earn higher returns for the more risk you take on.

Also within the low-risk investment category – and with a time horizon that can extend from a few months to several decades – are unit trust tax-free savings accounts. These provide access to underlying funds and are a good way to combine tax efficiency with investment savings. Investors can save R33 000 a year up to a lifetime limit of R500 000. Growth on investments is tax-free and so is the money that investors withdraw from the account. Used as a pre- and post-retirement savings option, tax-free savings accounts can have a lifespan of 40 years: twenty years pre-retirement to accumulate assets and 20 years post-retirement when money can be

31 January 2018

Aligning your savings time horizon with the best investment options withdrawn tax free to help supplement retirement income in a tax-efficient way. Further up the time horizon spectrum are equitybased investments, such as property, equity and balanced funds. These require a time horizon of more than five years as the opportunity they provide to earn higher returns also comes with higher risk. Over the long term, equities have proven to be the highest-performing asset class but short-term downturns can take years to recover. The risk of having an investment time horizon of less than five years is that investors’ portfolios may not have sufficient time to recover short-term losses, if they occur. EQUITY RETURNS VS BONDS AND PROPERTY OVER 23 YEARS

Balanced or multi-asset funds have an investment time horizon similar to equity funds, typically around seven to 10 years as managers focus on longer-term macroeconomics and business cycles to position portfolios for growth, while keeping volatility low. Balanced funds aim to provide investors with ‘the best of both worlds’ by including exposure to equities and bonds. The equity allocation can be as high as 75%, dropping to 60%, which is still fairly high. Understanding investment time horizons is not just about ensuring investors’ portfolios have time to recover if there is a market downturn; it is about understanding the mind set driving managers’ decisions. Investing in a balanced or equity fund positioned for a business cycle five to seven years ahead, when your personal time horizon is less than five years, means your outlook is not aligned to how the manager is managing the fund. Investors can go wrong by choosing an equity or balanced fund and then stressing about short-term underperformance when the manager is managing the portfolio for the long term. INVESTMENT TIME HORIZON OF DIFFERENT TYPES OF INVESTMENTS

At the far end of the time-horizon spectrum are private equity and other alternative investments such as infrastructure and credit funds, which are longer-term investments typically only available to high-net-worth investors with a minimum lump sum investment of R1m. Private equity involves buying a stake in a private company and transforming it by replacing management, introducing new product lines or selling non-core business units, a process that can take years. However, eligible investors should not be put off by the time horizon. Most people will open an education fund when their children are born with a time horizon of around 20 years, which aligns with private equity provided an investor’s other investments are sufficiently diversified. Over the past 10 years ending December 2016, private equity funds managing assets of between R500m and R1bn returned 18.6% per annum according to the latest RisCura SAVCA South African Private Equity Performance Report. South African equities returned 15.6% over the same period. Realistically estimating a savings time horizon is about effective planning. It is the first step to consider in investing planning and determines the types of investments available for investors to choose from. It is important not to over- or under-estimate time horizon. If, as an investor, you are not planning to access your savings for 10 years, consider investments with a higher return profile that can enhance your returns for the time you are saving. The longer you are prepared (and able) to leave your money untouched, the greater choice you have of different types of investments. In times of volatile markets, it becomes even more critical to realistically estimate your time horizon to get the most from your investments.

Book value that makes for good reading. Introducing the Sasfin BCI Opportunity Equity Fund managed by Errol Shear. A key member of the Sasfin Asset Managers investment team and an award-winning Fund Manager, Errol brings over 30 years’ experience and his unique pragmatic value investment style to bear on the portfolio. Each stock has been handpicked by Errol, with the focus on delivering solid long-term returns for investors. To find out more, contact your financial adviser or Sasfin Asset Managers direct on +27 11 809 7510 or email business | wealth | banking

Sasfin Asset Managers (Pty) Ltd Reg no. 2002/003307/07 An authorised financial services provider licence no. 21664 and a member of the Sasfin Group. This information has been distributed by Sasfin Wealth on behalf of Sasfin Asset Managers (Pty) Limited


Don’t let a midlife crisis catch you off guard

DR ANTON HAY Financial Services Director, Ecsponent


e stereotypically talk about a midlife crisis as a time of excessive spending on luxury cars or one where people indiscriminately quit a career to pursue a passion. Is it a real phenomenon, or just a normal rite of passage that allows (especially) men to buy flashy sports cars or indulge in plastic surgery? A midlife crisis is described as ‘a psychological crisis brought about by events that highlight a person’s growing age, inevitable mortality, and possibly shortcomings of accomplishments in life’. Some attribute it to a greater awareness that life is finite and a fear of not reaching one’s life goals. For others, the cause points to a traumatic event, such as a divorce. Typically, between the ages of 45 and 64, one may experience feelings of depression, remorse, and anxiety, or the desire to achieve youthfulness. In August this year, Bloomberg reported on the findings of two economists who, in a working paper, offer statistical proof for the existence of the midlife crisis. The survey, which included 1.3 million people across 51 countries, found that respondents from both genders reported having a positive

KIM HUBNER Business Development and Marketing, Laurium Capital


riting this article in November 2017 for publication in January 2018, seems like riding a bike blind folded, with two significant events to play out over the next four weeks. The first being the potential downgrade by S&P and Moody’s later this month (or otherwise mid-2018), and more importantly the outcome of the December ANC elective conference. Not only will the outcome of the conference have a direct bearing on the currency but also the direction the stock market is likely to take in 2018. If there is a positive, market friendly outcome to the December conference then the rand should strengthen and retail stocks should appreciate sharply. A positive outcome will provide the South African economy with a very big tailwind for the year. However, it’s a very difficult outcome to predict and polls are notoriously unreliable. So, what does this mean for investing a lump sum in 2018? It’s becoming increasingly important to drown out the noise and focus on longterm outcomes. When evaluating a fund manager, skill set, team experience and track record are key. You also want to put your money with a manager that has skin in the game by having most of their own investable assets in the funds that they manage.

31 January 2018

outlook in their 20s, a little less rosy in their 30s and pretty miserable for people over 40. The decline in happiness continued until around age 50, when they started to feel satisfied with their lives again. These findings are mirrored in our market and are important because a midlife crisis can be devastating to investors’ financial wellbeing. “We all too often see people in this category who have saved and invested prudently for years, go on to damage or even destroy their financial future, almost on a whim. Marriages dissolve, families are abandoned and depression rages – all which have an emotional and financial effect on entire families,” says Ecsponent Financial Services Director, Dr Anton Hay. His advice to anyone experiencing this phenomenon is to accept that the emotional response is normal and to deal with the cause, while at the same time addressing the symptoms. “Middle age is a trying time. We work hard for years, perhaps waiting for the children to leave the nest to reclaim our lives, and when it happens it can be quite anticlimactic,” says Dr Hay. “Finding ways to rekindle your youth can seem to be the antidote to our

feelings of disappointment or regret.” However, he stresses, while we must acknowledge the midlife crisis’ existence, we must also preserve our financial reserves. “During this time, we are already facing financial risk – we’re at greater risk of becoming unemployed, experiencing age-related illnesses or losing a spouse. And very likely, we’re also supporting older or even adult children as well as our ageing parents. Now is not the time to act out your impulse. “Don’t make any radical decisions or changes during this time. Get help from a financial planner and a life coach or therapist to guide you through the crisis. With some patience and time, this storm will pass too,” Dr Hay says.

Focusing on long-term outcomes

Investing in Multi-Asset High Equity Funds – a good option The largest Collective Investment Scheme category in the SA market is by far the Multi-Asset High Equity Fund category with R476bn in assets, accounting for 25% of total industry assets. Retirement money contributes to a large portion of this, due to Regulation 28 requirements. Despite the proliferation of funds (241 funds as at 30 September 2017), the South African Multi Asset High Equity sector is currently dominated by the ‘big 4’ asset managers who collectively account for over R300bn (about 68%) of category assets (Source: ASISA, October 2017). While these funds have solid track records, they also tend to be highly correlated. A differentiated approach Boutique managers have their own unique way of managing money, which is often very different from the larger houses. Combining managers who have a differentiated approach can significantly enhance your returns and reduce risk. Managers – like ourselves – believe that being nimble gives us an advantage in producing alpha as this means we can capitalise on opportunities that larger managers simply can’t. Launched 9 December 2015, the Laurium Balanced Prescient Fund is ranked 7/147 funds in the South African

Multi Asset High Equity Sector since inception to 31 October 2017, with a cumulative return of 24.7% after fees (12.2% annualised) vs median peer cumulative return of 15.3% (7.9% annualised). While this track record may seem short, the fund was launched off the back of the success of the Laurium Flexible Prescient Fund, which celebrates its 5th anniversary on 31 January 2018, and is ranked number one in the SA Multi Asset Flexible category to end October 2017, since inception (Source: Morningstar). The Laurium Balanced Prescient Fund is, for the most part, a Regulation 28 version of the Laurium Flexible Prescient Fund. By allocating a portion to the Laurium Balanced Prescient Fund, you will be diversifying

your clients’ retirement portfolios, and offering them superior risk-adjusted returns over time. 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). CIS’s are traded at the ruling price and can engage in scrip lending and borrowing. Performance has been calculated on the A1 class using net NAV to NAV numbers with income reinvested. Highest rolling 1-year return since inception of 16.6%. Lowest rolling 1-year return since inception of 3.5%. There is no guarantee in respect of capital or returns in a portfolio. For any additional information such as fund prices, fees, brochures, minimum disclosure documents and application forms please go to *Source: Morningstar 31/10/2017

Laurium Balanced Prescient Fund

(ASISA) SA Multi Asset High Equity Average

Source: Morningstar


Our history of sustained, exponential growth, makes your investments thrive.

Enjoy peace of mind knowing you invested in the JSE-listed financial services group that, for the last five years, has grown its average annual profit by more than 200% per annum.

We offer a range of preference share investment options providing stable, predictable returns of up to 11.2% per annum*. Let us help you grow. For more information about our history of growth and investment options, visit

* Terms and Conditions apply. Ecsponent Limited’s preference shares are offered to the public through Ecsponent Financial Services, a registered financial services provider.

Investing with the times



31 January 2018

Global equities to deliver best 2018 returns This year promises to be no less eventful than 2017 and so we asked Old Mutual Investment Group’s investment experts to highlight the one big theme they each expect to dominate the horizon for investors during 2018. AI – hype or investment revolution? HYWEL GEORGE Director of Investments, Old Mutual Investment Group

For many, the AI milestones that have been achieved over the last five years have set us up for the greatest technological revolution in history over the next decade – but will this revolutionise the investment industry? I believe so, and while this raises the spectre of a future where computers have superintelligence that surpasses our own, I am convinced it will be a matter of human and machine being better than human alone rather than human versus machine.

dominated by speculators and the ‘smart money’ beginning to take profits. The key things investors need to consider are: • Regulation remains an obstacle globally and locally for cryptocurrencies • The competitive edge of any one cryptocurrency over the next is weakened by intense competition and the absence of intellectual property protection • Valuation remains distorted by the amount of speculators active in each currency. Our view: cryptocurrencies offer an exciting and interesting – but speculative – investment opportunity. The mystery of low inflation

AI’s disruption of investment management

DAVID COOK Joint Boutique Head, Old Mutual Titan

SALIEGH SALAAM Portfolio Manager, Old Mutual Customised Solutions

Getting to the bottom of the mystery of low inflation in the developed world is going to be an important determinant of financial market fortunes next year. Some reasons for why inflation may be so low are: • Technology and the rise of the super computer • Globalisation and the ongoing deflationary forces in the East • Unemployment not being as low as it seems • Inflation expectations proving to be a self-fulfilling force • Deficiencies in how we measure or define inflation.

Big Data and AI can help active investors seek out informational advantages to achieve alpha but AI and Big Data will be best leveraged by those investment professionals with practical, real world experience of managing money and implementing quantitative outcomes. The explosion of data, processing power and algorithmic techniques over the past few years can help investors obtain insights into nontraditional factors that can affect markets and company valuations. Decoding currencies from gold to paper to e-money ZAIN WILSON Investment Analyst, MacroSolutions

There are plenty of signs that bitcoin and the broader cryptocurrency market are in the midst of a bubble, including the astronomical rise in price; a sudden proliferation of ‘expert’ opinions and articles; the market for the asset being

Solving this could result in inflation being measured at higher levels than it is today and thereby having a material knock-on effect on interest rates and asset prices.


Source: FactSet. Note: Year to date to 31 October 2017.

Global equities still the place to be in 2018 JOHN ORFORD Portfolio Manager, MacroSolutions

While it’s unlikely that global equities will experience the same magnitude of returns in 2018 as they did in 2017, we expect this asset class to still deliver the best returns in 2018. Why? • Global growth is likely to continue performing reasonably well, driving global earnings • Should global inflation remain relatively modest, the US Fed would be most likely to continue with a steady and gradual approach to raising interest rates. If that is the case, it would be appropriate to maintain an overweight allocation to global equities. However, any signs that the US economy is beginning to overheat or inflation is on the rise would be cues to investors that the bull market in global equities is nearing its end. Here comes the emerging consumer market SIBONISO NXUMALO Joint Boutique Head, Global Emerging Markets

What with rapid urbanisation, rising incomes, increasing global political influence and favourable demographics, the emerging market consumer is taking centre stage. The most visible sign of this: In Asia, where China’s Singles Day has become a shopping day many times bigger than US’s renowned Black Friday weekend (the biggest shopping weekend in the US’s annual shopping calendar).

When sustained low economic growth becomes bond bearish WIKUS FURSTENBERG Portfolio Manager, Futuregrowth

The South African government, with the exception of brief periods, has been consistently running budget deficits. Though not bad per se, this does require a healthy economy for the level of borrowing to be sustainable. When it is not, quick fiscal fixes, like increasing taxes as opposed to reducing expenditure, could have potentially unwelcome longerterm consequences such as lower consumer demand and downward pressure on growth. Government would then have to rely more on borrowing to fund the deficit and the resultant increase in bond issuance would lead to rising yields. Where we see obstacles, we see opportunity JONATHAN LARCOMBE Analyst, Old Mutual Equities

The outlook for low economic growth is a reality and set to play out in South Africa into 2018 and beyond. While it may appear that the opportunities to invest in this environment are mainly in offshore companies, in fact many well run, locally focused companies have performed well on the JSE. These companies are often mispriced; driven by investors’ ‘fear’ in these uncertain times, and, as such, present great investment opportunities.

A WORLD ON EDGE Our investment experts highlight the key big themes they expect to dominate the horizon for investors next year.

GLOBAL EQUITIES still the place to be

BITCOIN – exciting but speculative investment opportunity INVESTMENT REALITIES of a low-growth trap

ARTIFICIAL INTELLIGENCE – hype or investment revolution?

SOLVING THE MYSTERY of low inflation in developed markets a priority



NOT ALL AI/BIG DATA investment managers will be equal


ECONOMIC RESPONSIBILITIES of asset managers come under the spotlight

For more information visit

Old Mutual Investment Group (Pty) Ltd (Reg No 1993/003023/07) is a licensed financial services provider, FSP 604, approved by the Registrar of Financial Services Providers ( to provide intermediary services and advice in terms of the Financial Advisory and Intermediary Services Act 37 of 2002



31 January 2018

Investor sentiment appears ‘positive’ Should investors be prepared for relatively muted returns on global equities in 2018? MoneyMarketing asked Nadia Van Der Merwe, Business analyst at Allan Gray, how global markets are expected to behave over the next twelve months.


lobal markets have been particularly strong over the past nine years. In fact, at the start of 2017, the US stock market entered its ninth year of a bull market that started with the 2009 lows. This represents the second-longest bull market in the S&P500’s history and the market has continued to rally over the past year. The solid returns have not been limited to the US equity market. Financial assets in developed markets overall have been strong over the period. One reason is the unprecedented level of quantitative easing (printing money to buy financial assets, thus driving asset prices up and interest rates down). Central banks globally have engaged in quantitative easing since the global

financial crisis (GFC) to encourage confidence and economic growth. With bond yields at very low levels, investors have turned to equities in search of returns. This has provided a tailwind to prices of developed market equities, in particular those that have defensive or ‘bond-like’ characteristics. As a result, prices and valuations in many developed markets appear stretched. We don’t believe the level of recent returns can continue indefinitely. It is, however, impossible to reliably predict a turn in the markets. Investor sentiment appears positive, and measures like the Volatility Index or ‘VIX’, which is constructed using the implied volatilities of a wide range of S&P500 index options, closed at its lowest level

PETER-JOHN MARAIS CFP® Director, Progressive Wealth


ollowing a rather challenging 2016, investors were rewarded in 2017 for sticking it out in risk assets such as local and global equities. The JSE All Share Index has delivered 17.9% so far for the year of 2017 (as at 8 December 2017 and following the Steinhoff news), however, most of this return came towards the second half of the year (with 80% of the return coming since July). This truly reinforces the mantra of time spent in the market as opposed to attempting to time the market. As can be seen in the chart, the bulk of the 2017 returns were driven by the industrials sector, with shares like Naspers already providing returns in excess of 80% year-to-date. By contrast, local financials have been rather flat this year, thus going forward, presenting a few investment opportunities from a valuations perspective. With resources at a current P/E multiple of 14, this sector also offers investment opportunities worth some consideration. Asset classes that were winners in 2016, such as bonds and property, were more muted in 2017 and have delivered 5.5% and 11.1% respectively (at the time of writing). This subdued performance has largely been marred by political and economic issues facing South Africa, all of which have been reflected in investors movement of capital. Offshore assets have been rewarded significantly in rand terms, with strong global markets as well as the rand weakening over the last few months. The standout performers have been offshore equity, with developed markets (MSCI World Index) and emerging markets (MSCI EM Index) delivering 17.8% and 27.6% in rand terms. Looking at 2018, ratings decisions and the December ANC Elective Conference aside, we

ever in early November 2017. This is a clear indication of the complacency in the market regarding current valuation levels and prospective returns. Rather than focusing on the general level of equity markets, we spend our time on those factors that we believe are within our control. With risks skewed more to the downside, we are focusing on building diversified portfolios of undervalued assets. These, we believe, should be able to provide some protection against downside risk and deliver good returns, with the goal of outperforming global markets over the next few years. We pick shares on their individual merits. This means that despite valuation levels suggesting lower prospective returns going forward, there is opportunity to benefit from dislocation in valuations within and across markets, and to find businesses trading for less than they are worth. The global investable universe is broad and deep, and even in expensive

markets one can still find mispriced assets offering attractive returns. We believe the current opportunity set offers above-normal potential to identify attractive opportunities. For example, while valuations are generally steep for predictable businesses, the environment has punished companies perceived as uncertain. In many cases, such companies’ valuations have fallen to the cheapest levels since the GFC. We see opportunity in several of these shares. XPO Logistics and Abbvie, both US companies, are examples of two of our top holdings that have been penalised for uncertainty. We consider these companies to be trading on attractive valuations. There are also markets which haven’t experienced similarly high returns and where valuations appear notably lower. Selected emerging markets fall into this bucket. This is another area where we are finding value among individual stocks such as Chinese ecommerce companies NetEase and

The year that was and the year that lies ahead continue to believe that equity, both local and offshore, should continue to deliver positive results for investors. In line with the house views of our investment committee (Graviton), we will maintain an overweight position to offshore equity and maintain reasonable exposure to SA equity, within the confines of each of our client’s portfolio mandates. Bonds have displayed the most amount of risk, given the looming ratings downgrade and ANC Elective Conference which usually affects the pricing of local bonds, and given the abysmal Medium Term Budget Policy Statement and the R50bn deficit, these bonds should reflect a higher compensation for investing in them. At the time of writing, our view is to wait for more attractive yields before entering this asset class in a more material way. While the ANC Elective Conference from 16 – 20 December has been eagerly anticipated, the contest between the two front runners will be crucial for the country’s economic prospects. Nkosazana Dlamini Zuma and Cyril Ramaphosa seem to be the front runners with markets favouring a Ramaphosa victory. Should this transpire, the potential scenario could be

Source: Morningstar

a relief rally in fixed interest locally and some rand appreciation, likely to result in rand hedge stocks declining. This could also be short lived as South Africa’s economic problems still exist and the market will need to come to terms with the massive task Ramaphosa would face in getting SA back to its glory days. Should a Dlamini Zuma victory occur, the belief is that the market would not like this outcome and we could see bond yields spiking, a weaker rand, but an overall rise in SA equity given the strong rand hedge nature of SA equities (specifically industrials and selected resource rand hedges). In both scenarios, we believe the market will overreact and create opportunities to deploy capital where valuations are attractive.

31 January 2018



Navigating risks and opportunities in 2018


ast year, the global scene was characterised by firm and broadening economic growth, low inflation almost everywhere and a good environment for emerging markets, reflected by a soft dollar, firmer commodity prices and strong capital inflows. But will this last throughout 2018? “As this environment has been in place for some time now, and has been reflected in strong global equity performance, the inevitable question is when all of this will turn sour in the light of global central banks gradually pulling in the extreme stimulus measures that have been in place in the aftermath of the global financial crisis in 2008/9,” says Rian le Roux, Economic Strategist, Old Mutual Investment Group. While a legitimate concern for investors, Le Roux adds that such an outcome is not in store for 2018. Importantly, with global inflation pressures still relatively muted and growth, while improving, still sub-par compared to past cyclical global upturns, policy makers are unlikely to turn unexpectedly aggressive with policy normalisation.  It appears that the US Federal Reserve will act very cautiously this year, as long as inflation remains soft, he adds. This is good news not only for the US economy, but pretty much for the entire world economy.  “In essence, there are four key risks for 2018 that investors are keeping a close eye on. They are: an unexpected strong inflation rise – especially in the USA after all, policy error by key central banks, China’s debt deleveraging (leading to a growth slowdown) and geopolitics, especially the tensions in the Korean Peninsula,” Le Roux says. Torsten Slok, Chief International Economist at Deutsche Bank, however, has made a list of 30 risks that may play out this year. They include a Bitcoin crash, elections in Italy, the United Kingdom, Ireland and Russia as well as the possible popping of housing bubbles in Canada, Australia, Sweden, Norway, and China. Slok also cites risks such US midterm elections in November and a US equity market correction, of

which he says: “We haven’t seen one for a long time; are markets ready for even a small correction?” How to navigate these risks – and the many opportunities for 2018 – is open to debate. “In our Quality Range of funds, which includes the Investec Global Franchise Fund, our investment philosophy is simple: we want to invest in great companies,” says Abrie Pretorius, Portfolio Manager – Quality, Investec Asset Management (IAM).

flow. There are many businesses in the market today with very high leverage, poor cash generation and revenue growth and questionable franchises, and they stand to be severely tested when the cost of capital and/or risk premiums start to increase.” Pretorius acknowledges that there is great opportunity in the digital leaders of tomorrow, “but we are picky in choosing in which to place our faith.” “We do not have any exposure to the FANGs (Facebook, Apple, Netflix and Google) in the Investec

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disrupting the travel industry, internet domain registration company Verisign or electronic payment provider PayPal. “Secondly, we try to ensure that we invest in businesses with a very clear competitive advantage and ability to protect that advantage,” says Pretorius. “For this you need not only a very strong and dynamic management team, but also a strong balance sheet behind them to help lead change. Examples are Johnson & Johnson and Nike, which are continuously driving change in their respective industries.”  Thirdly, Pretorius says a very disciplined valuation framework is needed, especially in the headiness of the current market, to ensure that you don’t overpay for growth.  “In summary, our approach remains the same as it has been for the last decade. We conduct in-depth proprietary fundamental analysis of the stocks in which we invest, seeking to ensure that the company’s business model, financial model and capital allocation are aligned with the longterm interests of shareholders and other key stakeholders.  “Ultimately, it boils down to identifying those businesses that can continue to compound and reinvest at a higher rate of return.”

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The portfolio is a sub-fund in the Investec Global Strategy Fund, 49 Avenue J.F. Kennedy, L-1855 Luxembourg, Grand Duchy of Luxembourg, and is approved under the Collective Investment Schemes Control Act. The manager does not guarantee the capital or return of the portfolio. Past performance is not an indicator of future outcomes. Investec Asset Management is an authorised financial services provider.

“Typically, those companies we deem quality stocks are associated with global brands or franchises and can sustain excess returns on their invested capital. Historically, most of these companies were found in the consumer staples sector, but increasingly, we are finding opportunity in tech leaders.”  However, Pretorius warns of the false allure of some of these disruptors. “In an environment of loose monetary policy and the very low cost capital, many of these companies – despite disrupting entire industries – are not generating positive free cash

Global Franchise Fund. In the case of Netflix, because we are concerned about the business model, and the others because we struggle with the long-term growth and profitability expectations implied by the current valuation of the businesses, especially relative to our opportunity set of stocks we already own.” The IAM Quality team’s preferred companies generate free cash flow and have a strong business model, such as the continuously evolving Microsoft, which is digitising the industrial supply chain of businesses, or companies like Priceline, which is




LILIANE BARNARD CEO, Metope Investment Managers

31 January 2018

TFSAs: Why listed property is the most tax efficient option


ax free savings accounts (TFSAs) were first introduced in South Africa in March 2015 to encourage household savings. Neither income earned nor capital gains are taxed in these savings accounts. The annual allowance for TFSAs was raised in the 2018 tax year from R30 000 to R33 000 per annum, with a capped lifetime limit in contributions of R500 000. The decision of where best to allocate the R33 000 annual allowance is not always an obvious one for investors. The most tax efficient use of a TFSA is in fact 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 then 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. But, an investment in an equity TFSA does not see a recoupment of the company tax rate paid. 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 Currently investors are not able to switch between TFSA funds and therefore investments should have a long-term horizon versus shorter-term savings, such as paying for a holiday or car. If investors decide to withdraw funds from a TFSA, they will not be able to re-invest that money as part of their R33 000 per year or R500 000 lifetime limit, so leaving the investment as long as possible and maximising growth through compounding income will result in the maximum tax savings benefit. 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. Over the past 10 years, listed property has delivered the highest total returns when compared to other asset classes, having returned 13.6% over the last 10 years, with projected total returns of around 12% to 15% per annum over the next three years. The compounding effect of growing distributions Compounding income (ie the returns on reinvested income) added more than 3.5% pa to total returns over the last 10 years. In other words, if you had reinvested your income instead of withdrawing it each year, you would have boosted your total return by 3.5% pa, thereby realising total returns of 13.6% pa, rather than 10% if you had withdrawn your income each year. Tax advantages of REITs REIT legislation was recently enacted which entrenched the principal of income flow-through for those JSE listed property investment vehicles classified as REITs. As a result, REITs pay minimal tax within the company if at least 75% of the property income



*(numbers based on assumed scenario in Table1)



Listed Property Tax on Dividends Capital Gains Tax Total Tax Saved in TFSA

Equity Dividend Withholding Tax Capital Gains Tax Total Tax Saved in TFSA


18% 88 544 R 29 813 R 118 357 R

26% 127 896 R 43 063 R 170 959 R

Marginal Tax Rate of Investor 31% 36% 39% 152 492 R 177 087 R 191 844 R 51 345 R 59 626 R 64 595 R 203 836 R 236 713 R 256 439 R

41% 201 683 R 67 907 R 269 590 R

45% 221 359 74 533 295 891


18% 45 407 R 48 884 R 94 291 R

26% 45 407 R 70 610 R 116 017 R

Marginal Tax Rate of Investor 31% 36% 39% 45 407 R 45 407 R 45 407 R 84 189 R 97 768 R 105 915 R 129 596 R 143 175 R 151 322 R

41% 45 407 R 111 347 R 156 754 R

45% 45 407 122 210 167 617

*(numbers based on assumed scenarios in Table 1 and Chart 1)

is distributed to investors, leading to higher taxable income in the hands of the investor. This contrasts with equity investments, where companies are subject to 28% corporate tax before paying out a dividend to investors, which is then taxed at a flat dividend withholding tax rate of 20%. It is only the 20% dividend withholding tax that can be saved in a TFSA. Illustrative example In a simplified example, we compare the tax savings in a TFSA with an underlying investment of equity versus listed property. In the example (see Table 1), we assume that both asset classes give the same pre-tax total return to investors of 12.5% pa. However, the returns differ in the income and capital components. Historically, listed property has derived more than half of its returns from its income and the remainder from capital. Equity on the other hand, pays a lower dividend yield but has historically shown higher capital growth. We assume the following: TABLE 1 Asset Class

Dividend Yield

Capital Return

Total Return

Listed property




As a result of the different tax treatment of income and capital gains, and the REIT dividends versus equity dividends, the tax savings in each fund differs as outlined in the Table 2 (above). At the end of the period, when comparing what an investor would have generated in an ordinary investment (not a TFSA), a listed property investor in the highest tax bracket would have been taxed 45% on the REIT dividends earned by the listed property portfolio, resulting in R221 359 in taxes (see Table 2). Additionally, they would be taxed R74 533 in capital gains if they were to liquidate, resulting in total tax of R295 891. In comparison, an equity investor would have attracted R45 407 in dividend withholding taxes at a flat rate of 20%, and R122 210 in capital gains, resulting in total taxes of R167 617. Therefore an investment in a listed property TFSA enjoys a greater tax saving than an investment in an equity TFSA. The overall result is that, in all tax brackets, the tax savings in listed property as an underlying investment for a TFSA is greater, and this only increases as an investor’s marginal tax rate increases. It is worth noting that although the effective tax rate appears higher for REITs, this is because minimal tax is paid in the company.

Listed property is a clear front runner Listed property is particularly well suited to offer In Chart 1 (see above): the most tax benefits for investors opting to save • An investor saves his/her maximum of R33 000 per money via TFSAs. In addition, there are significant year for 15 years, saving a total of R495 000, just benefits of compounding total returns when reshort of the R500 000 lifetime limit investing the higher income yield generated by • All dividends are re-invested listed property over a longer-term horizon. • Both funds earn the same total return of 12.5% pa, resulting in a final value of R1.44m after 15 years 1 A Real Estate Trust (REIT) is a listed property investment vehicle • It is assumed that the taxpayer has not used his/her that publicly trades on the JSE REIT board and qualifies for the annual capital gains exclusion of R40 000 REIT tax dispensation Equity




31 January 2018

Investors favour Germany over UK for commercial real estate


ne in three (33%) commercial real estate investors have suggested that Germany is their preferred region to invest in. This is according to the latest commercial property investment barometer (Q3 2017) from pan-European online real estate solution platform, BrickVest. This is the first time that Germany has been chosen as the number one region to invest in and ahead of the UK which was selected by a quarter (27%). The UK saw a drop from 33% to 31% in the last quarter and from 32% in the same Barometer 12 months ago. Nearly one in five (17%) selected the US, which represents a slight increase from 12 months ago (16%), while France was selected by 15%, the same as Q3 last year. The Barometer also revealed that UK, French, German and US investors are now less favourable towards the UK since last year: 45% of UK, nearly a quarter (21%) of US, a fifth (19%) of French and 18% of German investors suggested they favour the UK this quarter, representing a decrease from last year across the board from 46%, 26%, 28% and 21% respectively. According to BrickVest’s investors, the average risk appetite for commercial real estate continues to rise to 52% from 49% last quarter and from 48% this time last year, meaning a sentiment shift from low to balanced risk. German investor risk appetite increased significantly from 50% last year to 62% while the US saw an increase to 54% (47% in Q3 2016). UK investor risk appetite also increased from 46% to 47%. However in France, average risk appetite decreased significantly from 62% to 45%. BrickVest’s Barometer also showed that the investment objective for the majority (55%) of its investors is capital growth compared to 33% who said income. Emmanuel Lumineau, CEO at BrickVest, commented: “Our latest Barometer reveals that Germany has overtaken the UK as the location of choice to invest in commercial real estate. Investor risk appetite continues to rise as commercial real estate offers opportunities, especially in the form of debt like investments which offer good risk adjusted returns in a volatile market environment.”





31 January 2018

The secret to managing a living annuity effectively Are most retirees with living annuities aware that taking a high monthly income can negatively affect their future? MoneyMarketing asks Shaun Ruiters, Executive: Business Development at PPS Investments how drawdowns should be managed.


living annuity offers the flexibility and freedom to actively manage retirement income levels and choose where the capital is invested. The secret to managing a living annuity effectively, without depleting retirement capital prematurely, lies in the level of income to withdraw and taking a long-term view of your post-retirement. Reaching retirement is only the beginning of the retirement journey and funds should be managed as such. Treat your postretirement as a long-term investment plan to mitigate the risk that the income may not last for the duration of your retirement. When invested in a living annuity, retirees have to learn to accept that there will be

periods of positive and negative returns. As can be seen in Graph 1, during periods of positive returns, as measured by the All Share Index, investors experience strong growth on their investments. In this example, even after drawing an income as high as 8%, investors still experience above inflation returns. Essentially, investors experience the full potential of the perks of a living annuity – drawing a fairly decent income while gaining investment growth on their retirement capital. During periods of negative market returns, like the financial crisis of 2008/9, investors’ experience significant losses on their retirement capital and drawing an income exacerbates these losses. This is illustrated in Graph 2. When analysing the ASISA flows we can see that investors have a tendency to move to less risky categories and asset classes during these periods of underperformance. However, this may not necessarily be the most efficient way to manage your income needs. Given that conventional wisdom states that if a higher income is required, clients should take on more risk, we analysed all rolling one, five and 15-year periods and identified the worst ALSI returns over these specific periods to see if high incomes were sustainable.


Source: MorningStar and internal calculations


Source: MorningStar and internal calculations

The top worst periods are shown below: Time period

SA Equities

1 year to 28 February 2009


5 years to 30 April 2003


15 years to 31 July 2002


*Annualised periods Source: I-Ress

We then analysed what would have happened to your investment if you decided to draw an income over these periods from a risky asset class, such as SA Equities (as measured by the All Share Index). The research showed that this risky asset class only started yielding noteworthy returns for income withdrawals for an investment period of five years and more. However, the level of income required also needs to be taken into account. If one removed the 17.5% cap from a living annuity, drawing an income of 9.00% as the starting point (with an annual escalation of 5.25%, and maintaining this amount regardless of the capital reduction) over the 15-year period, this would mean that you depleted your entire investment after 12 years. Even a pure equity portfolio cannot sustain certain income withdrawals in high levels of volatility. What is evident is that volatility is as important as returns when investing for income drawdowns and that a low volatility, more balanced portfolio (one that is conscious of short-term capital loss) as well as the investment horizon, needs to be considered as an optimal post-retirement income solution. In addition, retirees may try to adjust the monthly income withdrawal (currently between 2.5% to 17.5%) to factor in inflation or when circumstances change. Living annuities are therefore not just about returns, but risk as well. With any investment, it is important not to panic during these volatile periods but to remain committed to your financial plan, in consultation with your qualified financial adviser. Sporadic changes and knee-jerk reactions during market fluctuations tend to deter one from reaching the investment goal they set out to achieve.

Shaun Ruiters, Executive: Business Development, PPS Investments


31 January 2018

DUGGAN MATTHEWS Chief Investment Officer, Marriott


nowing whether you have saved enough for retirement is one of the primary causes of financial anxiety for pre-retirement investors. The current investment environment, characterised by economic uncertainty, coupled with a choice of over 1 000 unit trusts and a myriad of different products, has made it increasingly difficult to make informed investment decisions. In order to plan for retirement, it is important to filter out the ‘noise’ and focus on the information you really need to know – how much income will my savings generate in retirement? If the income element of an investment could be reliable and consistent, then the future outcome of that investment could be predicted with a high degree of certainty. This information – the income produced by an investment – is the key to knowing whether you are saving enough today to sustain your lifestyle in the future. Marriott can tell you what level of income your investments will produce in the future, thereby providing you


Ensuring your retirement plan will succeed

with financial peace of mind. Our income focused investment style produces reliable and consistent income and capital growth over the longer term, thereby providing a more predictable investment outcome. This income focused approach to investing has recently been endorsed by a study in the Harvard Business Review. Late in 2014, the review stated that “our approach to investing is all wrong. We need to think about monthly income, not net worth”. The successful implementation of an income focused investment strategy requires a choice of investments or securities that produce reliable income regardless of economic conditions or market volatility. Typically, the type of investments which demonstrate this ability are companies which focus on basic necessities, enjoy country wide distribution and have strong balance sheets. These companies tend to fare well in both recessionary and growth phases of the economic cycle and are seldom at the mercy of a new idea,

trend or fashion. Shoprite (see graph) is a good example of a company with these attributes. Marriott only invests in businesses of this nature and can therefore provide an accurate indication of the level of income our portfolios will produce in the future. This information will allow you to make financial decisions that are well informed, and to make additional contributions or defer retirement should you require more income. One of the most tax efficient means of saving for retirement outside of the workplace is through a retirement annuity. Not only is the income earned exempt from all forms of tax, but the

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contributions made are deductible, subject to certain limits. Whilst the annuity earned from these savings is fully taxable during retirement, the benefits of tax-free capital accumulation from the re-investment of income, coupled with a likely lower marginal tax rate on retirement, makes this a highly tax efficient savings vehicle. The Marriott Retirement Annuity provides long-term growth, a disciplined savings method and an on-going indication of your income at your projected retirement age. This, we believe, is the essence of a sound financial plan and achieving financial peace of mind.

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31 January 2018

Facilitate the right choices today for financial wellness tomorrow


artnering with the right umbrella fund can reduce the inherent conflict between saving for retirement and spending on more pressing day-to-day expenses. Katherine Barker, Head of Momentum FundsAtWork, says that this conflict, which inevitably impacts negatively on retirement outcomes, can be lessened by proactively encouraging certain preretirement behaviour. Saving for retirement via their employer’s retirement arrangement is often the only form of retirement provision many South Africans make. Currently, however, around 90% of employees cash out their retirement savings when changing jobs. If this low level of preservation persists, the average member faces a retirement income which is less than 10% of the salary they will receive just before retirement. The Momentum/Unisa Consumer Financial Vulnerability Index for the third quarter of 2017 shows South Africans are more financially vulnerable than ever. This, coupled with South Africans’ poor savings culture, places income replacement ratios at retirement under even more pressure. While the inherent cost-efficiencies of umbrella funds help to increase

replacement ratios, much more rate or make additional voluntary needs to be done to close the current contributions, facilitates behaviour retirement savings gap. Barker says: that boosts retirement savings. Barker “The right umbrella fund is a highly says increased preservation, coupled flexible, integrated solution in which with umbrella fund efficiencies and all parts work together to enable and flexible contributions, can push average encourage pre-retirement choices that replacement ratios up to 50%. boost retirement outcomes. Financial Reward programmes are also an advisers are pivotal in this process, using important part of umbrella fund the umbrella fund’s ‘building blocks’ solutions that encourage the right to bring to life a ‘best advice solution’ pre-retirement choices. Incentives that uniquely tailored encourage healthy for each client.” lifestyle choices The right lead to improved INCENTIVES THAT umbrella fund health, ENCOURAGE HEALTHY physical facilitates which reduces LIFESTYLE CHOICES decision-making medical expenses in critical and insurance costs. LEAD TO IMPROVED areas such as This in turn releases PHYSICAL HEALTH preservation more money into and level the pool in which of contribution. A ‘smart exit’ day-to-day expenses compete with process helps resigning members to future savings. The discounts that understand the impact withdrawing members receive through reward retirement savings will have on their programmes also generate cost savings retirement outcomes, and motivates that increase this pool of funds. them to remain invested by also However, the real power of reward looking at the potential tax liability programmes is unlocked when the which will be incurred if savings are reward structure is cleverly integrated cashed out. Furthermore, functionality with the umbrella fund’s benefits. If that enables members to automatically effective, this integration can create increase their annual contribution a virtuous cycle in which employees’

JAC DE WET National Head of Sales, PSG Wealth


healthy behaviour choices generate financial returns that can be used to cover medical expenses and can even be channelled towards retirement savings. Barker also believes umbrella funds should be unlocking the benefits of outcomes-based investing, which offers members the highest possible expected returns for the lowest possible risk. Furthermore, flexible insurance benefits that can adjust based on a member’s changing needs, reduce over-insurance and facilitate the flow of more money to retirement savings. Barker concludes: “Turbulent times and tough economic conditions mean day-to-day expenses are competing even more aggressively with future savings. However, choosing the right umbrella fund will encourage behaviour that leads to improved financial wellness at retirement.”

Katherine Barker, Head: Momentum FundsAtWork

Why many retirees fail to accumulate enough capital

he actions and decisions investors make – both pre- and post-retirement – contribute to the reality of far too many ill-equipped retirees in South Africa. Investors are meant to build up a big capital base in the pre-retirement phase, but many simply fail to accumulate enough. Post-retirement, some investors also fail to grow their capital base sufficiently, while others have drawdown rates that are just too high. There are three common reasons for not accumulating enough before retirement:

Not saving early enough Longer life expectancies mean that investors need to start saving as early as possible and continue saving for as long as possible. Compound interest is often touted as the eighth wonder of the world, but it takes time to work in your favour, so it is best to start saving as soon as possible. Medical advances mean that lifespans are increasing, and investors often don’t realise how long their retirement years could last.

Allocating too little to growth assets Growth assets (such as equities and listed property) outperform more conservative assets like cash and bonds over the long-term. Growth assets are needed in any investment portfolio with a longer time horizon, but these assets typically come with higher levels of short-term volatility. It is not always necessary to move assets from growth to conservative assets as investors approach retirement, as the investment term post-retirement is usually longer than expected. These risks, uncertainties and emotions should be managed to keep investors on track.

Failing to consider how much you will need (and cashing in what you have already saved) Generally, people don’t save enough, but they also don’t consider that longer lifespans mean they need to have accumulated even more capital by the time they retire. This could also mean higher medical expenses, which need to be factored into budgeting. Failure to plan and a lack of commitment to savings plans are definitely factors, as is the tendency not to preserve retirement funds when changing employers.

Mistakes made after retirement • Drawing too much income Drawing income at a higher rate than the investment is earning, means that investors erode their capital. If this continues for too long, they run the risk of depleting their capital. • Poor management of expenses Retirees can often not continue with the same lifestyle post-retirement. Making adjustments becomes essential and seeking professional advice from a certified financial planner, while following sound investment strategies post-retirement, can help in managing post-retirement income and seeing it go the distance. • Not growing your portfolio after retirement In the face of investment risk and longevity, a portfolio has to consistently perform in excess of 10%. This implies some exposure to growth assets – or alternatively taking a very low income drawdown. Either way, a growth rate of more than 10% is difficult to achieve in the current environment and investors can benefit from the guidance of a qualified adviser.


31 January 2018

Underwriting disrupters – changing the face of the life insurance industry


ver the last few years, the words ‘disruption’ and ‘disrupters’ have gained momentum and become a big part of the financial services industry, particularly in the insurance space. These days, insurers are becoming banks, banks are becoming insurers, retailers are becoming banks and insurers, and individuals can buy directly tailor-made insurance offerings with decreasing premiums. The financial services industry has, during the past number of years, seen an increase in individuals who were traditionally employed by large insurance companies, leave these companies’ employ, to start their own niche specialised financial services businesses. The reasons for this growing exodus are based on the increased financial literacy of the man on the street. Customers have become increasingly demanding and will take nothing less than differentiated and bespoke services and products that suit their specific needs on the spot. Technological advancements have also played a major role in boosting consumer savvy. Not only are consumers sharper, but now organisations have the opportunity to engage directly with their clientele, and find out exactly what their needs are. These ‘disrupters’ spot the gaps in the market, realise that they can close these gaps with their expertise, and seize the opportunity to capitalise on them. Their solutions based model has been very successful, and they have become insurance companies in their own right. As brilliant as these ideas and innovations are, these entrepreneurs generally do not have insurance licences, which come with high capital charges and onerous legal and compliance obligations. This is where cell captive companies and underwriters, like Guardrisk, come in. Guardrisk’s cell captive structure provides all the benefits of owning an insurance company, without the inherent cost and administrative implications. This includes providing underwriting, reinsurance, claims management, investment and accounting functions to cell owners, which keeps costs down and gives access to a broad base of insurance skills. The insurance industry had always leaned toward providing Affinity products (allowing companies to provide insurance under their own brand name), but now, these innovators have given rise to Volume products (non-

affinity branded products), where both life and non-life insurers are underwriting products and services – not brands, allowing for great growth in the industry. Looking at the life insurance space in particular, we’ve seen incredibly innovative ideas and product offerings and distribution capabilities that make us think: “How did we get by without this in the first place?” For instance, if two people take out the exact same retirement annuity, should they receive the same monthly payment if one’s life expectancy has been calculated to be substantially shorter than the other? There are now companies remedying this, offering enhanced bespoke annuities for sub-standard lives. Others have come up with specialised dread disease covers, automated life products with fulfilment done electronically, and even an aggregate credit life consolidation product. This is the definition of differentiation.  As in many other first world jurisdictions, the South African financial legislation is battling to keep up with this rapid development in the digital and technology space. These newly developed capabilities have the potential to bring financial products to millions of previously ‘unbanked’ people at a fraction of the traditional cost. The regulatory dilemma is to balance generally outdated rules and laws with the significant enhanced customer experience that these new capabilities bring – already we are seeing laws, still in draft form, which may be outdated the day they get signed into legislation. Lawmakers and regulators need to ensure that they create a fair and equal regulatory framework and environment that allows these entrepreneurs to have the opportunity to participate and succeed in the industry. We see this as a huge win for the consumer space, as well as for the industry. These new entities do not necessarily take business away from the traditional insurance companies, but rather, add value to the retail industry by increasing the pool of products and services, as well as improving existing products and services. All industry players win, and most importantly, the client walks away with a host of products and services that cover them completely. This is not about the one or the other, but rather how new technology and traditional insurance principles can supplement and support each other to ensure a much improved customer experience.


Chubb launches dedicated Entertainment Practice Chubb has announced the launch of its Entertainment Industry Practice for middle market entertainment companies. The new practice is dedicated to providing innovative and industry-leading insurance products to meet the evolving and specialist needs of entertainment companies operating in South Africa and Sub-Saharan Africa. Chubb’s Entertainment Industry Practice offers a broad range of specialist coverages and services uniquely designed for entertainment companies. This includes tailored and comprehensive products for commercial media producers including business interruption coverage for cast, production media and extra expenses as well as coverage for public liability and property theft, damage and breakdown. The new practice also provides specially tailored coverage for event companies offering protection against losses resulting from cancellation, interruption and postponement. “We are committed to the continual development of market-leading solutions which address the evolving needs of our brokers and clients,” says Gary Jack, Country President, Chubb, South Africa. “This newly-launched middle market practice offers entertainment companies a bespoke insurance solution crafted to address the industry’s unique needs and affords protection against related financial exposures involved in producing media content or organising an event.” Says Francis Hernandez, Entertainment Manager Overseas General, Chubb: “We are hugely excited to be launching our event cancellation and media production offerings in South Africa and look forward to providing both our existing customers and hopefully some new ones with a solution to meet their needs in the entertainment sphere. Offering local policy issuance and service in South Africa for this class of business has been a long-term goal for Chubb and one I am very happy to say we can now provide.”


FRANCOIS SCHAAP Managing Director, Guardrisk Life and RYNO VAN DEN BERG Managing Executive, Guardrisk: Volume



31 January 2018

Disability and critical illness cover available to people with HIV


ver the past two years, the majority of South African life insurers have expanded their range of products available to people living with the human immunodeficiency virus (HIV) to include disability and critical illness cover. SA was the first country to introduce life cover for people living with HIV in 2001. Dr Maritha van der Walt, convenor of the Medical Underwriting Standing Committee of the Association for Savings and Investment South Africa (ASISA), says so much has changed in the almost 40 years since the virus that causes AIDS was identified in the early 1980s.  “Not so long ago being diagnosed with HIV was a death sentence for many. Also, early treatment programmes were expensive and difficult to adhere to. Today, HIV is considered a treatable chronic disease like diabetes and many others. In fact, SA has the largest and one of the most affordable HIV treatment programmes in the world.”  Van der Walt says vast improvements in the treatment of HIV and a better understanding of the long-term outcome of treatment programmes have enabled life companies to insure HIV positive customers on the same basis as customers with other treatable chronic

diseases. A chronic disease is defined as a condition that can be managed, but not cured. She says life companies increasingly have access to reliable South African data relating to the HIV/AIDS survival rate and the way the disease responds to treatment. This has enabled life companies to start innovating products that meet the needs of people living with HIV. The cost of cover has also reduced in line with the improved life expectancy due to better treatment.  Van Walt says now that those living with HIV have access to a much wider choice of long-term insurance products, it is important that customers compare cost as well as terms and conditions to make sure the cover will meet their individual needs.  She recommends that customers ask the following questions before buying cover: • Can the life cover be reduced or changed to accidental cover only? If yes, under what circumstances? • Does the policy require ongoing testing and compliance with treatment? What are the consequences of non-compliance? • Is the premium guaranteed and for what period? By how much can the premium increase over time? • Is the initial premium loaded (a higher premium to factor in

higher risk) and does the policy make provision for the premium to be reduced over time if the risk decreases? • Does the policy only provide for life cover or does it include additional benefits such as critical illness and disability cover? Other SA milestones Van der Walt says South Africa has achieved a number of milestones in recent years aimed at ensuring the fair treatment of South Africans living with HIV.  The ASISA HIV Testing Protocol, for example, provides best practice guidelines for HIV testing for insurance purposes and has been hailed as one of the best in the world. The HIV Testing Information Sheet is available in 11 languages and sets out quality standards for HIV testing and also addresses aspects such as personal pre- and post-test counselling.  Another first for the South African life industry was the introduction in July 2008 of telephonic pre-test counselling via a toll-free number for consumers who have applied for life insurance policies and require an HIV test. This service is offered in addition to written and individual pre-test counselling.  In 2012, ASISA extended this free telephonic service to post-test

counselling. The aim is to reach customers who do not have access to a personal doctor. Once a client has elected in writing that he or she would like the HIV test results sent to the call centre, the call centre will provide telephonic counselling in one of South Africa’s official languages and will also arrange for follow-up tests and treatment if required. Further testing and treatment is for the customer’s own account.  Customers can also request faceto-face post-test counselling with a doctor and life companies will pay for the initial session.  “While life insurance products have become so much more accessible and affordable for people living with HIV over the past 17 years, the life industry will continue to develop products that increasingly meet the needs of people living with HIV. Life insurers will also continue to help raise awareness by facilitating pre-test as well as posttest counselling.”

Dr Maritha van der Walt, convenor of ASISA’S Medical Underwriting Standing Committee

CT fire risks increased by water restrictions

Due to water restrictions in the City of Cape Town, many businesses in the region are now at risk of having their insurance claims denied in the event of fire damage. This is according to Annelie Smith, Corporate Executive, Risk Benefit Solutions (RBS), who explains that current water restrictions are making adequate fire risk management increasingly difficult for companies.  “The reduction in water pressure is now one of the biggest problems for businesses with emergency sprinkler systems, since the pressure is too low to allow many of these systems to operate,” Smith says. “If a company’s business insurance policy outlines that the property must have a working sprinkler system, the insurer has the right to repudiate a fire claim if the sprinklers did not activate at the time of the fire.”

Smith adds that many of Cape Town’s older commercial properties do have water reservoirs to supply water in the event of a fire. “However, the current water restrictions affect these properties as well, since they cannot refill these reservoirs at the moment, and a number of businesses actually use the water in these reservoirs for other functions as well.”  According to Smith, fire risks will only increase as the drought continues. Adding to the water problem is of course the fact that fire risks are much higher in the summer months.  “Insurers are also discussing the additional risks that the drought in the region is causing, and they are trying to find ways to better manage possible claims. We have already seen recent cases of insurers increasing some Cape Town based businesses’ premiums by as much as 25%.”  More insurers may choose to increase premiums related to fire risks over the coming months. “If this continues, we may well see affected businesses reach a point where they simply cannot afford fire risk cover at all. As a policyholder, you will have to speak to your broker to make sure that your policy actually does cover loss as a result of a fire if the sprinkler system did not activate due to the drought, the specific conditions that the policy has, and that the insurer has not added any exclusions that could jeopardise your ability to

claim for fire damage.” Smith stresses that businesses will need to step up their fire risk management considerably. “Companies have to relook all of their existing risk management procedures and also add a few more. One measure that we can recommend, especially in the absence of an optimally functioning sprinkler system, is to increase on site fire marshals or security personnel. “Businesses could also increase the number of portable fire extinguishers and firehose reels on site, to enable the fire marshals or security to deal with small fires immediately, and contain the damage as soon as possible.”  Making sure that the relevant documentation is up to date, is also vital. “For example, if there are any welding or similar ‘hot works’ taking place on the property, you have to make sure that you assessed the risk and are taking due care via a ‘hot works permit system’, which will ensure that buildings do not burn down as a Annelie result of internal Smith, work done by Corporate the company Executive, or contractors Risk Benefit Solutions on site.” 


31 January 2018


The challenges facing medical schemes


or the third consecutive year, South Africa’s medical schemes industry posted poor financial results in 2016, with 65% of schemes failing to achieve an operating surplus and having to draw on their investment returns, a strategy that is unsustainable in the long run. This is according to Alexander Forbes Health’s Diagnosis, an annual publication prepared by the Technical and Actuarial Consulting Solutions (TACS) team, which analyses key trends in the medical schemes industry The industry, as a whole, also experienced its highest claims ratio since 2009, according to the publication.  This 2017/2018 Diagnosis provides an overview of the financial and demographic performance of medical schemes between 2000 and 2016, and considers the key issues shaping the industry.    Medical scheme numbers The top 10 open medical schemes by principal membership have remained unchanged since December 2015, although Hosmed is now the tenth largest open medical scheme following the amalgamation of Liberty with Bonitas. The top 10 restricted medical schemes by principal membership also remained unchanged during 2016, but LA Health is now the fourth largest restricted scheme due to an 8.9% growth in membership while Platinum Health is down to fifth place.  Growth in dependents for the majority of schemes was lower than the growth in principal members, with the number of dependents registered on medical schemes increasing by 0.6% in 2016, resulting in the average family size in the industry reducing from 2.23 in December 2015 to 2.22 in December 2016. This may indicate financial pressures, resulting in medical cover being purchased for fewer dependents.

Contribution Income In terms of operational performance, only seven of the country’s top 10 open and top 10 restricted schemes had sufficient contribution income to cover all claims and expenses in 2016. The industry, as a whole, achieved an operational deficit of R 2 390bn in 2016, almost twice the R 1 219bn deficit reported in 2015. Inflationary Trends The gap between medical scheme contribution inflation and consumer inflation (CPI) continues its downward trend, partly as a result of efforts by medical schemes to manage the costs charged by providers. Over the last 17-year period, medical care and health expenses inflation has been on average 7.6% per year, while CPI inflation averaged 5.8%, resulting in a gap of 1.8% per year. During the same period, average medical scheme contribution inflation was 7.5% per year, resulting in actual increases in medical scheme contributions per principal member exceeding CPI inflation by at least 1.7% per year. However, since this calculation includes buy-downs to lower options and reduction in family size, this is not indicative of the true picture. Thus, headline increases announced by schemes over this period are between CPI plus 2.5% and CPI plus 4.5%.   Healthcare expenditure The industry, as a whole, experienced a worse claims year in 2016 than in 2015, with the highest claims ratio since 2009. The risk claims ratio is the proportion of contribution income used to fund claims, excluding any allowance for medical savings accounts. The risk claims ratio for all medical schemes increased from 91.4% in 2015 to 92.1% in 2016. The generally accepted risk claims ratio benchmark is 85%, although this will depend on each scheme’s financial position and pricing strategy.   Non-healthcare expenditure Total non-healthcare expenditure as a proportion of gross contribution income increased marginally for the medical scheme industry as a whole, driven by an increase in the proportion of contribution income spent on non-healthcare expenditure by restricted medical schemes.   Investment Income In 2016, 54 of 82 medical schemes (65.9%) failed to achieve an operating surplus and had to draw on their investment returns, placing additional pressure on solvency levels. Alexander Forbes Health is of the opinion that this strategy is not sustainable unless investment returns are able to keep pace with, and preferably exceed, claims inflation.  

Financial Performance The noticeable deterioration in the overall operating results of the industry from 2013 to 2015 continued, with further deterioration of financial performance in 2016. The industry ended 2016 with an overall solvency of 31.6%, down from the 32.6% solvency reported in 2015. This trend was driven by a worsening solvency position of both open and restricted medical schemes. Industry Consolidation A National Health Insurance (NHI) Implementation Committee on Consolidation has been established and tasked with restructuring the current healthcare financing arrangements in the lead-up to the creation of a central NHI fund. This is to be achieved through five transitional arrangements covering the unemployed, the informal sector, the formal sector comprising small to medium sized businesses, the formal sector comprising large businesses, and the public sector.   Medical Schemes Sustainability Index With the continued consolidation of medical schemes in the industry as well as rising claims costs, the sustainability of medical schemes and the assessment thereof have become increasingly important for all industry stakeholders. The Alexander Forbes Health Medical Schemes Sustainability Index analyses the collective impact of key statistics on the sustainability of medical schemes in future years.  The biggest increases in the index for 2016 were seen for Transmed and Profmed, which improved their 2015 scores 20.8% and 17.8% respectively. Polmed is once again the top performer in the index, although it was not the top performer for 2016. The profile of the industry remains fairly stable.




31 January 2018

DEMOCRACY AND ITS CRISIS BY A C GRAYLING Prompted by events in recent years in the UK and the USA, in Latin America, Russia and the Middle East, A C Grayling investigates why the institutions of representative democracy seem unable to sustain themselves against forces they were designed to manage, and why it matters. In each of five short chapters, he considers a moment in history in which the challenges faced today were first encountered, how they were overcome – or not – and with what consequences. With the advent of authoritarian leaders and the simultaneous rise of populism, representative democracy appears to be caught between a rock and a hard place, yet it is this space that it must occupy, argues Grayling, if a civilized society, that looks after all its people, is to flourish.

ALWAYS ANOTHER COUNTRY BY SISONKE MSIMANG In her much anticipated memoir, Sisonke Msimang writes about her exile childhood in Zambia and Kenya, young adulthood and college years in North America, and returning to South Africa in the euphoric 1990s. She reflects candidly on her discontent and disappointment with present-day South Africa but also on her experiences of family, romance, and motherhood, with the novelist’s talent for character and pathos. Militant young comrades dance off the pages of the 1970s Lusaka she describes, and the heady and naive days of justdemocratic South Africa in the 1990s are as vividly painted. Her memoir is at heart a chronicle of a coming-of-age, and while well-known South African political figures appear in these pages, it is an intimate story and testament to family bonds. Sisonke Msimang is one of the most assured and celebrated voices commenting on the South African present – often humorously; sometimes deeply movingly – and this book launches her to an even broader audience.

ENEMY OF THE PEOPLE: HOW JACOB ZUMA STOLE SOUTH AFRICA AND HOW THE PEOPLE FOUGHT BACK BY ADRIAAN BASSON & PIETER DU TOIT Enemy of the People is the first definitive account of Zuma’s catastrophic misrule, offering eyewitness descriptions and strong analysis of how South Africa was brought to its knees – and how a people fought back.  When Jacob Zuma took over the leadership of the ANC one muggy Polokwane evening in December 2007, he inherited a country where GDP was growing by more than 6% per annum, a party enjoying the support of two-thirds of the electorate, and a unified tripartite alliance. Today, South Africa is caught in the grip of a patronage network, the economy is floundering and the ANC is staring down the barrel of a defeat at the 2019 general elections.  How did we get here? Zuma first brought to heel his party, Africa’s oldest and most revered liberation movement, subduing and isolating dissidents associated with his predecessor, Thabo Mbeki. Then saw the emergence of the tenderpreneur and those attempting to capture the state, as well as a network of family, friends and business associates that has become so deeply embedded that it has, in effect, replaced many parts of government. Zuma opened up the state to industrial-scale levels of corruption, causing irreparable damage to state enterprises, institutions of democracy, and the ANC itself.  But it hasn’t all gone Zuma’s way. Former allies have peeled away. A new era of activism has arisen and outspoken civil servants have stepped forward to join a cross-section of


civil society and a robust media. Award-winning journalists, Adriaan Basson and Pieter du Toit offer a brilliant and up-to-date account of the Zuma era in this book.

DISRUPT! 100 LESSONS IN BUSINESS INNOVATION BY JAMES TIDWELL Compiled by Springwise, the global innovation discovery engine, Disrupt! explains and highlights the best, most disruptive and most useful innovation ideas of the 21st Century, and shows which themes underpin their success and which ideas can best be used to drive creativity in the workplace, office or industry. Springwise has a huge online readership (700 000 page impressions a month, 31 000 FB followers, 62 000 Twitter followers and an email database of 160 000 names) and a reputation as the number one engine for collating and sharing cutting edge business ideas. Disrupt! draws on their vast archive and the expertise of their editorial team to create a practical, themed overview of contemporary innovation with simple, implementable strategies for bringing more creativity to a business or idea and more disruption to an industry. It is an indispensable handbook to modern innovation. Author, James Bidwell, is the majority shareholder and CEO of Springwise and has been listed in the Financial Times Creative Business Top 50 and named as one of London's 1 000 most influential people by the London Evening Standard, amongst many other tributes during his successful career in leading transformational change in business.

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Financial Services Publications 2018

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Money Marketing January 2018  

In January, MoneyMarketing looks at how to choose an appropriate retirement product, as well as the options open to those wishing to invest...

Money Marketing January 2018  

In January, MoneyMarketing looks at how to choose an appropriate retirement product, as well as the options open to those wishing to invest...