MoneyMarketing October 2017 by New Media B2B

31 October 2017 | www.moneymarketing.co.za

First for the professional personal financial adviser

WHAT’S INSIDE

BUILDING LONGLASTING CLIENT RELATIONSHIPS

YOUR OCTOBER ISSUE

People don’t need more products - they need to feel a connection. Page 11

ARE PLATFORMS MORPHING INTO TECH COMPANIES?

NHI NEEDS MEDICAL SCHEMES TO SURVIVE

Advisers and clients could be forgiven for thinking that platforms are evolving into technology companies Page 21

Clarity is needed around whether people will be prevented from belonging to a medical aid scheme

Page 26

Transformation slow in asset management industry

ast month, 27four Investment Managers released the results of their annual BEE. conomics Transformation in Asset Management Survey at the Nelson Mandela Institute in Johannesburg. The survey found that against the backdrop of a subdued economic environment, assets grew just 1.76% from R408.3bn in 2016 to R415.5bn in 2017. This represents 9% of the total R4.6tn of assets available for management by private sector asset managers (out of a total savings pool of R7.9 tn). The number of black asset managers expanded from 41 to 45 over the recent year. Institutional investors now account for 79% of the industry assets compared to the 85% they made up last year, and retail assets now account for 21%, up from 15% in 2016. This signals that some asset managers

have made good strides into the direct consumer market. As of 31 December 2016, the total size of the Collective Investment Schemes (unit trusts) industry was R2tn, but the total value managed by black asset management firms was R87bn, or 4% of the total. Of the 1 520 unit trusts registered, only 55 are

managed by black-owned firms. Access to markets remains an obstacle for black managers and vehicles such as Linked Investment Service Providers (Lisps) remain inaccessible. The survey also highlights that black asset managers are not reaching expected scale. It shows that those firms older than five years manage 82.41%

R415.5

BILLION

TOTAL INDUSTRY ASSETS MANAGED BY BLACK ASSET MANAGERS

of industry assets and that 12 blackowned firms have less than R100m in assets under management. One of the reasons contributing to this state of affairs may be the lack of marketing. “The South African pensions industry is fairly small when it comes to the number of large institutional asset owners allocating to managers and so net-working and gaining access is fairly easy for firms,” the survey states. “However, the overall savings and investments industry is much larger if you take into consideration medium sized asset owners, corporates, umbrella funds, endowments and trusts as well as the retail market that remains largely untapped by black asset managers.” In this space, building brand and marketing is vital. Yet, the survey finds that more than half of participants are spending less than 1% of revenue on marketing. Continued on page 2

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NEWS & OPINION

31 October 2017

Continued from page 1

“This is an internal factor,” 27Four MD, Fatima Vawda told delegates at the launch of the survey. “A lot more emphasis needs to be placed on creating good brand visibility. Very few asset managers are spending on this.” While consistent advertising allows a business to become a household brand, fewer than half of black asset managers advertise. In addition, none of the managers surveyed have a mobile app that allows customers to understand their investment products. Only half of all black asset managers have a website conducive to allowing clients to explore their products. Director of BEE at the dti, Jacob Maphutha, applauded 27four for the survey, saying that it was a job well done. “This survey is very important and will continue to inform policy decisions in government and the private sector. When it comes to transformation, the numbers tell the story: we have a long way to go to ensure that we create opportunities for black asset managers.” Sibongiseni Mbatha, President of the Association of Black Securities and Investment Professionals (ABSIP) and also a member of the Financial Sector Charter Council, told the launch that there was

EDITOR’S NOTE

a misconception that the economy must grow before it’s transformed. “We don’t buy that because you need to transform the economy as you grow it. Both transformation and growth are intertwined and can be carried out simultaneously.” Mbatha added that there was no evidence that black asset managers are performing worse than their counterparts. In fact, there was evidence that some black asset managers have outclassed their counterparts. “There’s no excuse why we shouldn’t be changing the behaviour of asset owners.” He pointed out that these managers did not receive a sufficient allocation from even the public sector. “This sector should do more to lead the way, but that doesn’t exonerate the private sector because it also has a duty to ensure that there is equity.” But time was running out, Mbatha said, indicating that more sector partnership with government was needed. “For the past 23 years, we have been saying please transform – we are no longer going to do that.” According to the survey’s research, the top five black asset managers include Taquanta Asset Managers, Aluwani Capital Partners, Mazi Asset Management, Kagiso Asset Management and Argon Asset Management.

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his month, the Minister of Finance, Malusi Gigaba, is tasked with presenting an extremely difficult Medium Term Budget Policy Statement (MTBPS). While SA did indeed exit its technical recession, growing by 2.5% in the second quarter of this year - the growth rate for 2017 will only be around 0.5%. This simply isn’t good enough because it won’t allow for job creation. The tone of economists’ comments on the data was subdued, indicating that on paper the recession might be over, but the environment would unfortunately not change meaningfully for the better, until confidence is restored among South African households, corporates and investors. And then there are the political developments as the ANC nears its December elective conference. As NKC Research pointed out: “The unemployment rate (which is now at 27.7%, a multi-year high), is likely to trend even higher, which would make economic life in South Africa more challenging. Real per capita incomes will likely fall for a second year in a row, a situation that will be placing a significant strain on an increasingly large percentage of the population. “Anecdotal evidence is all around us: shops and restaurants are closing, job losses have been announced in many industries, employees informed of remuneration cuts etc.” According to economist Professor Raymond Parsons, weak economic activity means that a serious fiscal gap will emerge in the MTBPS, as tax revenues have fallen badly. “How the MTBPS is managed in these tough circumstances now becomes a decisive moment for business and credit rating agencies in assessing SA's economic prospects.”

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Sibongiseni Mbatha, President of ABSIP

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Images: Russell Roberts

NEWS & OPINION

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4 NEWS & OPINION

31 October 2017

PROFILE JO-ANNE BAILEY, SALES DIRECTOR AND COUNTRY MANAGER FOR AFRICA, FRANKLIN TEMPLETON INVESTMENTS

How did you get involved in financial services – was it something you always wanted to do? From a young age, I was interested in the markets and understanding how they worked. Despite this I qualified as an attorney and was admitted to the bar in the early 1990s. I then went on to complete a higher diploma in tax law as I realised I was more interested in getting into the financial sector than any area of the law. I joined Investec Asset Management in the late 1990s as a legal resource and loved the industry from the outset. Although it has changed substantially over the years, it still remains one of the most exciting and challenging industries to work in. Over the years, I went on to work for several local asset management companies, in different areas of the business, and finally took the opportunity to work for a large global player. The experience with Franklin Templeton has been wonderful and has exposed me to many different cultures, practices and investment opportunities all over the world. What makes a good investment in today’s economic environment? Investing wisely in a tough economy is important. I think what makes a good investment today depends on several factors including, amongst others, your age and appetite for risk. The more risk you take, the higher the expected return. The closer you are to retirement, the more conservative you need to be as you will spend less time in the markets before you need

to realise your investments. What remains important, however, is the need to diversify your investments. What has become more apparent over the years is that we are living in very unpredictable times and to put all your eggs in one basket would be irresponsible. It would be prudent to look at the more traditional asset classes, such as equities and fixed income, as well as consider some real estate exposure. For those with the appetite, more alternative asset classes, such as hedge funds, provide exposure to higher alpha opportunities – but it is important to appreciate the potential downside in these types of investments. What was your first investment and do you still have it? My first investment (and best investment to date), was a house that I bought in 1998 in a security complex. It has returned in excess of 300%, and yes, I still own it. What have been your best and worst financial moments? My best financial moments are when I look at my portfolio of holdings and only see green! My worst moment was when I took an opportunity to buy pre-listing shares in a company that was about to list. The listing was not very successful to say the least! What important things will/do you teach your children about money? There are a couple of things which I stress to my daughter, Jessica. They include the following (she is 11 years old): • There will always be a rainy day so it’s important to put some money aside • Don’t spend your money without sleeping on it first…don’t be impulsive • Take care of the cents and the rands will take care of themselves.

UPS & DOWNS

US national debt rose to a record $20.16 tn in September, after President Donald Trump signed a bipartisan bill temporarily increasing the debt limit for three months. Trump pushed the statutory debt up by around $318 bn, the Treasury Department said. Before the bill's completion, US national debt was at $19.84 tn. The legislation allowed the Treasury Department

to recommence borrowing after several months of using what it called ‘extraordinary measures’ to avoid a financial default.

The unemployment rate in the UK has fallen to its lowest level since 1975. Official figures released last month, show that unemployment fell by 75 000 to 1.46m in the three months to July 2017 to stand at 4.3%. “Another record high employment rate and a record low inactivity rate suggest the labour market continues to be strong,” the Office of National Statistics said.

“In particular, the number of people aged 16 to 64 not in the labour force because they are looking after family or home is the lowest since records began, at less than 2.1 m.”

VERY BRIEFLY Provider of risk, performance and compliance analytics, RisCura, has announced the appointment of George Tsinonis who takes up the role of Head of Analytics. He has a BCom Honours in Investment Management and an MBA in International Banking and Finance from the UK. He has spent most of the last 20 years working in the UK, mainly for M&G Investment Management in London, where he fulfilled a number of roles. These include Head of Multi Asset Funds, Head of Portfolio Strategy and Risk, and Head of Equity Structured Products for the asset manager. Old Mutual Investment Group has, for the second consecutive year, been awarded the 2017 Thomson Reuters Lipper Fund Award. For over 30 years, this award has recognised funds and fund management firms across the globe for their dependably strong risk-adjusted three-, five-, and ten-year performance relative to their peers. The criteria for evaluating award winners is based on Lipper’s renowned proprietary performance-based methodology. The Old Mutual Albaraka Equity Fund outperformed competitors in the five-year Global Islamic Fund category. This Shari’ah-compliant Fund provides investors with cost-effective access to a broad spectrum of local and international listed investments, including the opportunity to invest on the JSE. The new Ashburton Property Fund was officially launched last month. “This fund targets both capital growth as well as income, serving as a key building block to any multi-asset portfolio,” Ashburton Investments says. “Listed property has been one of the best-performing asset classes, even on a risk adjusted basis over a five- and fifteen-year period. Although current distribution (dividend) growth may slow from the double-digit growth investors have become accustomed to (given the challenging macro backdrop), it is still however expected to exceed inflation over the coming years, making it a solid medium- as well as long-term investment.” Sasfin Wealth has announced the appointment of Johan Gouws as Head of its Asset Consulting division. Gouws has accumulated more than 25 years’ experience in financial services, and joins from Absa where he held the position of Head of Asset Consultants. According to Michael Sassoon, Head of Sasfin Wealth, the appointment is aligned to Sasfin Wealth’s strategy of strengthening its wealth management offering in the retail and institutional markets. “Johan is a vastly experienced, award-winning investment manager with a proven track record. He has consulted to some of the largest pension funds in the country and we are confident will add value to our investment capabilities. He is a strong addition to the team.”

NEWS & OPINION

31 October 2017

RICHARD RATTUE Managing Director, Compli-Serve

Waving the red flag Artificial intelligence (AI) is coming whether we like it or not Many years ago, motorcar owners had to employ an individual who waved a red flag and walked in front of the car to advise unsuspecting pedestrians to get out of the way of this new smoke-belching monster on the road. Today driverless cars are a reality. Advancement brings new and wonderful things, but it also brings uncertainty and fear. We’ve all heard about the rapid advances in artificial intelligence (AI) and associated technologies impacting financial services, using worrying terminology such as 'Codex 1 Blockchain Prototypes', 'cryptocurrencies', and the 'Fourth Industrial Revolution', to name but a few. While I may sound a bit cynical, and I am indeed an IT sceptic, I certainly don’t have my head in the sand where this is concerned. I have no doubt that technology will massively impact the administrative end of the financial services industry in years to come. Administrative tasks lend themselves particularly well to automation and thus AI that can effectively think for itself, albeit at a low level, will likely make a massive impact in this space. For those of you in advisory roles that require higher cognitive thought, you are probably in a safer seat from a machine taking over for the foreseeable future, however, no doubt the day will come when we have robots and machines that are on a par with ourselves and even beyond. Some of the movies I watched many years ago predicted this and generally it did not have very pleasant results for the human race. The Matrix Trilogy is but one movie that comes to mind. One can look at advances in robo-advice, cryptocurrencies and the like, as new technologies that will

certainly make some jobs vulnerable. I recently read it is estimated that up to 40% of asset managers, by way of example, will be irrelevant in years to come, as their roles are increasingly taken over by technologies, that are able to think smarter and faster (in theory) than the human element. My teenage daughter recently advised me that one can buy-in to technology called Virality, which is an AI invented by another teenager that scans Twitter worldwide and then predicts which matters are going to trend before time with remarkable accuracy and of course, advertisers are very pleased to be able to use this information and pay handsomely for it. The business opportunities that will abound in this Fourth Industrial Revolution are largely going over my simple head, however, the working environment is constantly evolving and this is not likely to stop. Turning attention to the regulatory and compliance space, we are unlikely to be spared in this AI onslaught, as some of the more administrative tasks are going to undoubtedly become automated. Thankfully, much of what we do requires higher thought and I would hope that compliance officers are safe, for now. Regulators will have to acknowledge the fact that banks and insurers will be using blockchain secure ledgers before too long and that cryptocurrencies are becoming more mainstream by the day. With the increasingly fast rate at which technology is moving, maybe we will all end up like the flag wavers of old. Only time will tell.

What should financial advisers wear?

he right wardrobe can have a profound impact on the respect your clients have for you. That’s the word from Terry Mullen, founder of US business intelligence platform for financial advisers, Truelytics. Dressing for success “Dressing for success in the financial services industry is not easy, or cheap, but it is important. Your clients can afford to dress down and go casual. They are, after all, the ones paying the bills. You, on the other hand, must always dress your best, and so must your brokers, advisers and anyone else who works for, and represents, your firm.” While training, education, and experience are obviously important, there are other, far more subtle, factors at play. One of those factors is how financial advisers and wealth managers dress each day. “What you wear can impact your financial planning or wealth management firm going forward. No matter how expensive your wardrobe or what designer labels you and your staff members wear, the clothes you take to the office should serve many important purposes,” says Mullen. He adds that office attire is a direct reflection of you and your abilities, so the pieces you choose should project the notion that you are capable, and that you have the skills you need to solve problems and provide exceptional advice for your clients. At the same time, the clothing you choose should be relatable to your clients, and appropriate for their needs and expectations. “What that means on a practical level is that you do not necessarily need a wardrobe filled with $3 000 Italian designer suits to make a powerful impression on your clients. As the owner of the practice, you need to assess the nature of your clientele and how the wardrobe you choose could impact their perception of you and your firm.” If a practice is made up of mainly blue-collar working clients, Italian designer suits may be unnecessary, or even counterproductive. If a client base consists of wealthier individuals, top-quality designer suits may be a vital business expense. “No matter what the nature of your clientele or your financial advisory firm, the men and women who work for you should always dress professionally. Casual office attire may have its place, but that place is not the modern financial planning and wealth management industry. “Whether they are serving as individual financial advisers, independent brokers or professional wealth managers, the people who work for you must project success and competence, and that starts with what they wear.” How clients dress Mullen is of the opinion that it doesn’t matter how financial advisers’ clients dress. “Even if the client is wearing a T-shirt and blue jeans, his or her broker should be outfitted in a quality business suit.” He suggests that male brokers and advisers invest in a basic wardrobe of quality components, including at least one summer and winter weight suit, a variety of dress shirts in both subdued shades and plain white and several pairs of stylish dress pants. While female advisers have a bit more flexibility in how they dress, the basic concept is much the same. “Skirts and business suits should project an air of understated elegance, and the length should always be appropriate for professional office wear.”

NEWS & OPINION

31 October 2017

One fifth of UK advisers looking to launch roboadvice service

One fifth of financial advisers could be set to launch their own robo-advice propositions in the future, according to exclusive research by Panacea Adviser, a UK online community and resource for financial advisers. The survey of 104 advisers in Britain, revealed that just 2% of respondents have already adopted robo-advice into their business while the majority (66%) of advisers said they had not yet decided whether robo-advice was right for them. However, there are also signs that advisers are warming to roboadvice. An earlier Panacea survey carried out in July 2016 found that 89%1 of advisers viewed robo-advice as a threat to traditional face-toface advice. Fast forward to a year later and 8% of respondents in the latest survey say they are currently in the process of creating a robo-advice offering, while 12% are actively considering a move into this space. Commenting on the results of the research, Panacea Adviser Chief Executive, Derek Bradley, said: “Robo-advice has attracted a great deal of attention and industry debate, which is what most likely sparked the initial strongly negative reaction from advisers towards the ‘rise of the robos’ a year ago. While automated services still represent a relatively small market in the UK and the technology itself is also fairly limited at this stage, it’s nevertheless interesting to see advisers remaining open to some of the opportunities presented by robo-advice. “But for robos to really take off, I would argue that the word ‘advice’ needs to be replaced with something more along the lines of ‘guidance’. And hand in hand with this, the Financial Conduct Authority (FCA) needs to step in to approve any robo models as fit for their defined purpose before launch, meaning that if the algorithms behind any piece of robo technology prove to be wrong then the approving regulator would be responsible and not the adviser. Without all these ducks lined up, robo is highly likely to fail.”

Adviser views

Advisers were also asked to openly share their opinions about the risks and opportunities of robo-advice. Time and cost savings were named as popular benefits of digital advice, while the simplicity of this type of service was also highlighted as a good way to engage a wider group of consumers with savings and investments. However, some advisers clearly still have significant concerns about robo technology too, with miss-selling and the blurred lines between advice and guidance being the most frequent risks named by survey respondents. Derek Bradley continued: “It’s called progress – that’s how one of our respondents summed up their view on robo-advice. And, of course, they’re correct that our industry must keep pace with technological change and evolving consumer needs. However, it’s only right that a major industry development such as this is properly considered and even critiqued by advisers, a sentiment which is reflected by the majority of our respondents, who say they are either still considering or feel undecided about robo-advice.” [1]

Based on 118 advisers surveyed.

More advisers using text messaging to connect with clients

inancial advisers in the US are using text messaging to communicate with their clients as email becomes a less effective way to stay in touch, says Hearsay Systems, the software-as-a-service digital marketing platform for financial services. Texting helps to drive a financial adviser’s business due to these factors: 1. Millennials don’t answer their phones By 2020, almost half of US workers will be millennials, and they simply don’t answer their phones, Hearsay Systems says. “If you’re serious about reaching this tech-savvy sector of the workforce, you have to text them. Many millennials find voice calls intrusive compared to receiving a text. “A Nielsen study showed that among 18-to-34-year-olds, average monthly voice minute usage has dropped dramatically from 1 200 to 900 minutes while texting among 18-to24-year-olds has more than doubled in the same period from an average of 600 messages a month to more than 1 400 texts per month.” 2. Texting is the most efficient way to get a transactional message across With email, there is a higher expectation for more context, but texts are supposed to be brief- and when you’re reaching out to a prospect, texting is a great way to force yourself to keep the message concise, says Hearsay Systems. “If you’re setting up a lunch to go over a retirement plan, you can worry about the details in person. Just text a note to set up a time. Texting will save you time (emails take longer to write) and help you get to the point quickly.”

3. Texting is personal Texting is the most intimate and personal form of communication available to you as an adviser. According to Hearsay Systems, a great email can still get lost in your prospect’s inbox, but a text message appears alongside your prospects’ texts from close family and friends. “It’s also a casual means to send someone a quick text, which can feel more thoughtful and help build relationships. As an adviser, you’re often communicating about big life ups and downs – a divorce, a new baby, an education savings plan. These are sensitive topics and being able to talk about them one-on-one over text can feel more intimate and private.” 4. Texting provides an easy entry point for a first conversation Because texting has such high open and response rates, it’s a great channel for beginning a serious conversation about financial products and services. “Perhaps a client of yours introduced you to his friend Gary at a party. You guys chatted casually and at the end of the conversation, Gary mentioned he’s looking for a new home. But you didn’t get his phone number. You follow up with your friend for Gary’s number and text him. This requires little effort on your end, and also makes it easy for him to ask for more information. “Since you’re highly likely to get a response over text, you can start the conversation about being a firsttime homebuyer and follow up over email with information about the real estate market in your city or obtaining a bond. Texting makes for a great conversational starting point for business when prospects want to learn more.”

31 October 2017

NEWS & OPINION

SA polo team wins Prince of Wales Cup Last month, one of the prime events on the African polo calendar took place when South Africa and Kenya played for the Prince of Wales Cup. The event, sponsored by Liberty, was a one-off test match – and the very first time the teams had competed against each other. The event took place at the Rosefield Polo Club in Centurion, Gauteng. The South African team was victorious, winning by seven points to six, over six chukkas, (an extra chukka being played to find a winner). The South African team included Zompie Tsotetsi, Stephen Stewart, Campbell McNab and James Kane Berman.

The Kenyan team was represented by Tisa Gross, Mbungua Ngugi, Archie Voorspuy and Jamie Murray. In 1925 His Royal Highness, Prince Edward of Wales toured South Africa and played in several polo matches. At the end of his visit, he donated the Prince of Wales Cup. “As a proudly South African company with a rich heritage, we are proud to be associated with one of the greatest events on the African polo calendar – an event that, over the decades, has inspired and left an imprint on Africans from all pillars of society,” Sydney Mbhele, Liberty’s Chief Marketing Officer said.

Image: Russell Roberts

Building wealth across generations

uilding up great wealth is one thing; holding onto it through multiple generations is another as borne out by the UK’s latest Sunday Times Rich List. Analysis of the data by the Centre for Economics and Business Research showed that Britain’s very rich are a changing cast of characters with two thirds having only entered the list since 2000. “This debunks the popular idea that great wealth is largely inherited, and gives credence an old English saying ‘from clogs to clogs in three generations’,” says Johan van Zyl, CEO of Stonehage Fleming, South Africa. “It takes great energy and ability to raise a person’s material wealth status; however these two traits are often not continued further down the generational line. “In our experience, one reason for this phenomenon is that many wealthy families focus only on building up financial capital, while ignoring other forms of capital which, together, will help them to break free from the mould that a family could potentially lose its wealth status in the span of three generations.” Van Zyl says it takes four primary pillars to support the successful transfer of wealth through many generations. Financial Capital Financial capital is the tangible assets, business and intellectual property of the family that have quantifiable financial value. Having weathered the financial crisis, very wealthy families are now focused on growing their wealth in addition to preserving it. As these families grow and the numbers of people these assets need to provide for increases, they are becoming more entrepreneurial and are increasingly willing to shoulder a greater degree of risk in order to achieve capital growth.

Intellectual Capital This is the accumulated skill, knowledge, experience and wisdom that the family can apply to the management of its wealth, its contribution to society, the individual fulfilment of family members and the collective wellbeing of the family. To ensure the management of intellectual capital within a family is handled successfully, strong leadership and carefully considered succession planning are required. It is also important to spread the intellectual capital a family has amassed far wider than just the family unit. Some families achieve this through mentorship, while others see it as part of their philanthropic efforts, particularly those in families unable to give as much financially to causes as they would like, due to a sense of being ‘asset rich’ but ‘cash poor’. Social Capital How the family engages with the communities in which it lives and how it uses its wealth and other assets to the benefit of society, comprises social capital. It includes social positions and the networks that help the family to use its wealth and other assets to the benefit of society and the good of the family. A significant portion of the social contribution of ultra high net worth families and the way in which they engage with communities comes through their business interests. As many have family businesses, they are able to contribute to society through job creation and providing services to customers.

Cultural Capital A family culture brings a family together by identifying shared perspectives and themes in the way family members conduct their lives, their approach to business, the way they treat others, the way they contribute to society, their attitude to wealth and the things they value. As the lack of a common mindset or shared values bridging the generations is the most common reason that many wealthy families fail to preserve their wealth over three generations, cultural capital is an extremely important pillar. Agreeing a purpose for the family’s wealth and defining it clearly are key.

Johan van Zyl, CEO, Stonehage Fleming South Africa

RISK

31 October 2017

RISK

Liability insurance an important aspect for businesses BERTUS VISSER Chief Executive of Distribution, PSG Insure

Four insurance considerations for body corporates

s times are tough economically, body corporates – whether for commercial or residential property – need to make sure they have adequate insurance in place. Compliance with legal requirements Last year saw new regulations and requirements from the Community Schemes Ombud Service Act (CSOSA) and the Sectional Titles Schemes Management Act (STSMA) – under which body corporates and all other community schemes fall. While some legal requirements only apply to sectional title schemes, others – such as the requirement to obtain fidelity cover – apply to all community schemes. By now, all community schemes should be registered with the Community Schemes Ombuds Service (CSOS). This applies to all sectional title schemes, share block companies and home or property owners’ associations. Further, all schemes should have lodged their governance documentation with the CSOS and submitted the scheme’s annual return and annual financial statements within four months of the financial year end. There is also a quarterly levy payable. In addition, sectional title schemes have to notify the CSOS, the local municipality and the local Registrar of Deeds of their domiciles, and must each establish a reserve fund by opening up a separate bank account and submitting a separate budget and statement for this fund. They also have to prepare a written maintenance plan. Cover against fraudulent losses Regulation 15 of the CSOS, 2011 states that, “every community scheme must insure against the loss of money belonging to the community scheme or for which it is responsible, sustained as a result of any act of fraud or dishonesty committed by any insurable person.” The definition of who qualifies as an insurable person is wide, but effectively refers to any person dealing with the money of the community scheme in any way whatsoever. This would include any scheme executive, employee or agent who has control over money and any managing agent, contractor, employee or other person acting on behalf of, or under direction of, a managing agent.

The minimum amount of fidelity cover required equals the total value of the community scheme’s investments and reserves at the end of its last financial year plus 25% of its operational budget for its current financial year. However, schemes would be wise to look at their specific investment strategies and may wish to have more cover for unforeseen expenses. Protecting the building and its surrounds Financially difficult times can make fraudulent acts more likely, as some people may be desperate to make ends meet. It is therefore vital to safeguard a scheme financially as much as possible. It would be worthwhile considering liability cover for damages caused on the property. What this means is that if an accident happens that impacts one of the tenants at an office park, for example, the office park would be covered. It would also extend to neighbours and surrounds. Imagine if a flood occurred within the office park that also damaged a neighbouring office park. Any claims submitted would need to be covered to avoid financial loss – which could be quite costly without cover. Standard building insurance is also needed to protect against storm and fire damage, for example. However, regular maintenance is required to keep the premises in top shape for insurance purposes. This includes roof maintenance, making sure no damages have occurred to exterior walls and keeping security features in good working order and in accordance with the insurance policy. If an office park has a security gate, the body corporate is responsible for making sure it is utilised and maintained. Keeping up with valuations For a scheme’s property to remain insured, all buildings under sectional title are required to be valued at least every three years. It is the obligation of the managing agent and trustees on the body corporate to have this valuation completed. Aspects that will come into consideration include the replacement value (including the cost to remove rubble) of the entire premises should it be destroyed, as well as the cost of planning and executing to rebuild.

Liability insurance is an important aspect for businesses of all shapes and sizes, says Simon Colman, Executive Head, Digital Distribution, SHA Specialist Underwriters. He lists the five most common public liability legal insurance claims:

Slip and Trip

In this instance shopping centres, supermarkets and hotels are usually victims of slip and trip liability claims. Property owners, particularly those that have a high volume of visitors, who are susceptible to bodily injury claims from either their guests or customers, can be on the receiving end of such a claim. The incident/ injury can easily be caused by a wet spot on the floor or an uneven tile. In these cases, the third party injures themselves but will allege that the property owner has been negligent.

Property damage or injury through the supply of a product

It is possible that consumers or clients can sustain injuries or have their property damaged by products supplied by retailers or manufacturers. The Consumer Protection Act (CPA) imposes strict liability on suppliers for such injuries or damage (section 61 of the CPA), meaning it does not have to be proved that the manufacturer was negligent if the injured party meets the definition of a consumer. Poor quality of products or badly formulated instructions on product labels are generally to blame in these instances.

Damage to property following defective workmanship

These claims are common within the automotive repair or building construction/renovation sectors. For example, a repairer or contractor can cause damage to a third party’s property due to some defect in the workmanship. Most liability policies do not cover the actual rectification costs of the damage to the item that was being worked upon, but rather the resultant or consequent damage.

Financial loss due to an ineffective product These claims are generally known as ‘inefficacy claims’ as they usually relate to losses of a financial nature, because a product did not do what it was supposed to, or expected to do. For example in the agricultural sector pesticides, seeds and animal feed are all high risk exposures to this type of liability. When calculating the loss sustained by the third party, liability insurers generally calculate the difference between the expected return and actual return.

Liability flowing from sudden and unforeseen pollution

There is a bigger focus on environmental issues and sustainability in the modern industrial environment. This type of liability claim can be brought against transporters that spill fuel or chemicals, possibly after a vehicle accident, or against property owners who allow pollutants to escape onto third party property. These claims can include clean–up costs, legal defence costs and damages. Most liability policies will require that a third party file the legal action before the policy responds, but many insurers will cover some part of the clean–up cost in order to mitigate the risks of lawsuits.

RISK 11

31 October 2017

e all know that South Africans are under-insured and this leaves our clients dangerously exposed to the financial consequences of injury, illness or death. Clearly, people would rather spend their money on coffee, expensive dinners and cell phones than on protecting their monthly income that makes it all possible. How did we get to this point? The reality is that people simply don’t connect to the need for cover. There is a general lack of trust in the insurance industry and we have failed to make insurance relevant. It’s time for a change. As an industry, we need to address perceptions that life insurance is complex and expensive, and that when you need it most, you have to fight to have your claim paid. We need to end this cycle of product upgrades and complex conversations because people don’t need more products – they need to feel a connection. They want a simple solution to their problem that is relevant

Building long-lasting client relationships based on trust to their lives and easy to understand. As Marcel Proust said, “The real voyage of discovery consists not in seeking new landscapes, but in having new eyes.” At FMI, we believe that the most powerful way to form a connection is through the power of a story. We have produced 21 powerful stories to help your clients connect with life insurance in a fresh way. To celebrate our 21st anniversary, we visited 21 inspiring policyholders who we’ve paid claims to over our history – people who were able to go on to achieve remarkable things despite the curve balls that life threw at them. These stories highlight the importance of protecting your greatest asset – your ability to earn an income and show the valuable role of the adviser in the process. The #21Lives videos connect, humanise and make insurance real – allowing people to see their own lives mirrored in the stories told. In addition, to assist in simplifying the sales process, we have developed

“

a sales toolkit built around three important steps: STEP 1 – Make your clients care: By going to the #21Lives video sharing hub on FMI’s website, select a story that relates to your client, fill in their email address and share. Here is the true power of #21Lives.The stories represent 21 different profiles, and in a world that is demanding personalisation, this allows you to select the story that most resonates with your client. STEP 2 – Tell your clients what they need to know: For each story, FMI have created simple factsheets that bring relevant technical product knowledge to life and an easy-to-use calculator to determine the value of your client’s future income. STEP 3 – Tell your clients what they need to do: You can fill out FMI’s simple Houseview Quote Request Form, to help select the level of cover and mix of benefits to ensure your client’s future

income stream is protected against the risks of disability, critical illness and death with a combination of lump sum and income benefits. We believe these tools can make a meaningful impact on your business and help ignite a conversation that will change your clients’ lives. We have already seen how people have been touched and impacted by the #21Lives stories and our hope is they will help us begin to change the way people think about life insurance.

“

BRAD TOERIEN CEO, FMI

WHEN I CALLED MY ADVISER SHE TOLD ME NOT TO WORRY, I HAVE ALL THE COVER I NEED. IT WAS SUCH A WONDERFUL PEACE OF MIND.

In 2016, Denise received the earthshattering news that she had breast cancer. Fortunately, her financial adviser understood the importance of income protection for business owners, and Denise could simply focus on her recovery without the financial stress.

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

RISK

31 October 2017

GEORGE KOLBE Head of Marketing for Life Insurance, Momentum

inancial woes don’t just affect your wallet and lifestyle – they also have a substantial negative effect on your physical health. And once this happens, it may have a further negative impact on your financial situation, creating a cycle that can repeat itself over and over again. This staggering link between financial stress and ill health in South Africa accrues from a research paper by Momentum titled Financial wellness and debt as a predictor of physical wellness and claims. Stress in general – which could result from financial worries - is a risk factor for mental and physical conditions, with those affected experiencing conditions such as anxiety, depression, migraines, ulcers, sleep disturbances and heart attacks. In particular, financial stress can be one of the most difficult risks to manage as it normally takes consumers a long period of time to just admit that they have financial problems. And by then the financial stress has already manifested itself in ill health. This also affects the whole family and can also lead to unhealthy coping mechanisms or habits, causing further health problems. “The research shows a clear link between consumers’ financial health

Financial stress linked to risk of chronic disease

and their physical health,” says Shaw. “Put differently, there is a relationship between the level and state of consumers’ indebtedness and their likelihood of suffering from chronic diseases, which in turn will have a negative impact on their financial situation.” According to Shaw, the study shows that consumers who are constantly in arrears with debt repayments are more likely to suffer from abnormal high blood pressure, than those who weren’t. This is an indication that financial issues trigger health problems. In addition, consumers who are constantly in arrears with debt repayments are also more likely to have high glucose measurements than those who weren’t, signalling possible diabetes problems. These health risks stemming from

PETER JENNETT Chief Executive Officer, Centriq Insurance

outh Africa’s cell captive insurance market is well-placed or in some instances better placed than the traditional insurance market to contribute to the country’s economic growth. But the challenges lie in the potential restrictions on ownership of cells and the outsourcing of business within the insurance sector. This begs the question: How do we broaden access to the insurance underwriting sector and protect customers at the same time? The key to growing a country’s insurance sector, and hence its economy, lies in providing more people with a wider variety of quality products and services. Well-regulated business outsourcing models like those offered by some of SA’s cell captive insurers allow us to do just that and create jobs at the same time. A well-run cell captive insurer provides the regulator with the regulatory oversight it requires in the sense that the cell captive insurer is responsible for all business written on its licence. For this reason, the cell captive provider is ultimately responsible for the business conduct of its underwriting partners and hence the quality of the products being developed, provided and distributed to insurance customers. With the barriers to entry into the insurance market

financial stress also manifested themselves in the medical aid claims of consumers. The research shows that once consumers’ unsecured debt reached 20 times their monthly gross income, their chronic medical aid claims almost doubled for all age and income groups. Unsecured debt normally reaches this point when consumers are in dire straits, in that they have to borrow to repay other debts and this is an indication of financial stress. What’s more is that poor health can also lead to financial stress once consumers have to incur out of pocket expenses to make co-payments to doctors, medicine and hospital treatment. This normally negatively affects consumers’ cash flow and leads to them falling in arrears with accounts or debts, which causes them to borrow even more to pay these

accounts and debts. However, this will affect consumers’ cash flow even further as they have to fork out even more money for debt repayments, leaving less money for other outlays such as food or transport costs. This increases the financial stress thus perpetuating the cycle of more health expenses and stress. According to Momentum, the first step to attaining overall Financial Wellness is to plan and manage your money with a budget, financial plan and financial advice from experts. George Kolbe, Head of Marketing for Life Insurance at Momentum says, “At Momentum we endeavour to always enhance the Financial Wellness of our clients. In addition to this, we are committed to encouraging better financial – and physical health through our Multiply wellness and rewards programme, which results in a noticeable improvement in average life expectancy. In South Africa, the average life expectancy for the insured population is 67, while the average life expectancy for Momentum Multiply members, on the higher status levels, is 89. This is even longer than that of the Japanese population, who at 85 years, has the longest average life expectancy in the world.”

Cell captive insurers wellpositioned to contribute to economic growth already high, we should be cautious not to: • Increase these barriers • Limit the number of quality operations that can enter the market • Make the costs so prohibitive that only a few large players can survive. We need to create an opportunity for small, wellmanaged underwriting operations to access the benefits of an insurance licence, thereby making an important contribution to both the economy and employment rates in the insurance sector. Cell captive insurers provide the core capital and oversight that is needed to protect the consumer and comfort the regulator. Cell captive insurers are furthermore well-placed to facilitate the entry of smaller players into the underwriting space. Given its predominantly business outsourcing model that consists of syndicates (individual cells) with a broad variety of owners that outsource to managing agents and, in turn, to various cover holders, Lloyds of London is a good example of what is essentially a cell captive insurer. The Lloyds syndicate model (effectively a cell captive model) has proven to be hugely successful, standing at approximately 99 syndicates managed by approximately 57 managing agents in selected

countries across the globe and approximately £30bn in gross written premium in 2016. With that said, it is evident that Lloyds will continue to make a phenomenal contribution to the United Kingdom’s economy. If we think big, there is no reason why we cannot create a similar market place in SA. We need to embrace the cell captive concept and encourage the growth of responsible capital supporting quality underwriters via a business outsourcing model. Cell captive insurers provide the South African insurance market with the perfect vehicle to include groups of people (who were previously excluded from actively participating and contributing to our economy) in insurance opportunities without major barriers to entry. This is something South Africa has been trying to achieve for a number of years without enough success. Overall, it is imperative that SA’s cell captive insurers continue to look for the right underwriting partners, backed by adequate capital. A wellmanaged outsourcing model not only provides excellent value to customers but creates a healthy market place for small business to thrive. Through this model, access to insurance underwriting is broadened while ensuring that customers remain protected.

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 yearsâ&#x20AC;&#x2122; 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 samadministration@sasfin.com

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Sasfin Asset Managers (Pty) Ltd Reg no. 2002/003307/07 info@sasfin.com 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

INVESTING

31 October 2017

INVESTING

MICHAEL SASSOON Executive Director: Sasfin Holdings Limited

Global is not an asset class South Africa ‘the most important market’ in Africa

ranklin Templeton Investments regards South Africa as the most important market in Africa, followed by Nigeria, Kenya, Ivory Coast, Ghana and Zimbabwe. “Despite some near-term challenges, we hold a positive long-term view on African markets in general, as they have the potential for strong economic growth, which, we believe, produces an environment favorable to corporate profitability and earnings growth,” says Dr Mark Mobius, Executive Chairman, Templeton Emerging Markets Group, Franklin Templeton Investments. Much of this potential has not yet been fully tapped, he adds. “Many African markets not only boast significant resources of oil, gas and hard commodities but also provide means to expand the production of soft commodities.” Mobius believes the opportunity is magnified by market valuations for African corporations, which often stand below those of their peers in more developed markets. He says that South Africa’s political problems are certainly well-known, but the good news is that the democratic process is in place even though it may take time to work. “In our experience, we have found managers of South African companies to generally be very capable and experienced. Many South African companies have expanded globally, so investing in a South African company means you often can get exposure in other parts of Africa and the rest of the world.” He adds that recent political developments have not impacted many companies to a great extent. “We see good things happening in the country that make us hopeful; for example, more and more of the younger people are getting involved in making the country better. As in other parts of the world, the hope and aspirations are with the youth. I believe they can and will make their country better.” Turning to Franklin Templeton’s outlook for economic growth in SA in the future, Mobius says the focus must be on government reform with a clear target of inefficiencies and corruption.

“Growth in South Africa is projected to rise in 2017 but less than 1%. In 2018 growth should be better and perhaps over 1%, but this kind of growth is very poor for a country like South Africa with a young population eager to work and progress.” He adds that private consumption and investment have been the weak spot which has led to the country’s sovereign debt ratings downgrade. “With commodity prices low we can’t expect growth from that area immediately but commodity prices have begun to even out and even climb from their low points. However, unless there are reforms on the labour front, we can’t expect a surge in that sector. We can expect some opportunities in the telecommunications and internet sector but we will need to be very selective in that regard.” The possibility of political reform is what investors find attractive about South Africa so there could possibly be a ratings upgrade, he says. “But there will need to be delivery on the part of the political elite before that attraction is realised.” The key macroeconomic concern about the country revolves around the poor credit rating South Africa has and the recent downgrade. “This reflects a political environment of ‘populism’ where government spending becomes excessive and more importantly those expenditures are subject to ‘rent seeking’ by politically connected people in the controlling party. Thus the country does not get the infrastructure needed to promote investment and economic growth. “So the macroeconomic concerns really revolve around the political concerns and the ability of the government to deliver the services and facilities needed by the people and investors,” Mobius concludes.

Dr Mark Mobius, Executive Chairman, Templeton Emerging Markets Group, Franklin Templeton Investments

As wealth managers, one of our key objectives is to take on a level of custodianship for your clients and their wealth. Investing is more arduous than ever before – some investors don’t necessarily understand the nuances of exchange controls, choosing a trading platform or even the implications of offshore investing in general. Our duty, therefore, is foremost to manage your clients’ money, but at the same time we want to empower your clients and ensure they understand exactly how and why they are investing in a particular asset class, through a particular platform. During times of heightened volatility, diversification becomes even more critical and is especially crucial given the present economic climate. This is particularly relevant today given the ability for South Africans to invest globally. Ultimately, we must view our lives, our wealth, and our future in global terms – global should be seen as the framework and not as an asset class within a local portfolio.

Growth in a global context

Sasfin Wealth has managed segregated offshore portfolios on behalf of our clients for a collective 70 years and has developed a well-structured research process to select the best quality companies from around the world. This philosophy gives clients access to ownership in the company itself. Imagine owning shares in MasterCard instead of just being charged each time you swipe, or, not just buying a movie ticket but actually owning shares in one of the biggest film companies of all time – The Walt Disney Company. Constructing a sophisticated global balanced portfolio is critical to achieving long-term capital preservation. SA investors are now more easily able to invest across many global exchanges, which enables us to build solutions for your clients that are more diversified than if we were only able to select companies on the SA exchange. Today, more than ever, you should be thinking globally about their lives. Sending children to offshore universities, opening up businesses offshore, or acquiring subsidiaries offshore are becoming part and parcel of the lives of many individuals. This is not just a South African phenomenon but a global one. This new reality has major ramifications on how one manages his wealth. There are some key questions to ask: • What is your client’s base currency? • How do your client’s assets match their future liabilities and income requirements assuming these are more global in nature? • What are the chances that your client or their dependents will want to either move abroad or spend more time abroad? • What exposure do your clients have to SA in general (including illiquid assets such as their house and business)? • Do they have money to invest beyond savings to enable their current lifestyle? For most of us, this line of questioning results in a need for much greater offshore exposure. Despite some rand strength over the last twelve months or so, this approach, particularly over the long-term, has yielded significant value to our clients over the last few years, especially as they view their wealth today more and more in dollar terms. To find out more about our global offering, contact your financial adviser or visit www.sasfin.com/globalwealth

THE GLOBAL MARKET NEVER SLEEPS. NEITHER DO WE. In todayâ&#x20AC;&#x2122;s market, finding the best opportunities takes global perspective. Ours comes from over 650 investment professionals on the ground across more than 25 countries.* Find out more at www.franklintempleton.co.za

* As of 31 March 2017. Investors should seek professional financial advice before making a decision to invest. Investments involve risks. Franklin Templeton Investments SA (PTY) Ltd is an authorised Financial Services Provider. Please refer to our website www.franklintempleton.co.za for more information. ÂŠ 2017 Franklin Templeton Investments. All rights reserved.

INVESTING

GAVIN KYTE Business Development, Laurium Capital

aurium Capital, the independently owned asset manager based in Johannesburg, celebrated its 9th birthday in August this year. The company was started in August 2008 by Murray Winckler and Gavin Vorwerg, who remain the majority shareholders and portfolio managers across all funds. Laurium’s core process across its funds is bottom-up fundamental stock selection combined with top-down macro views, and the key differentiator of an added focus on special situations, market inefficiencies, capital raises and cross-border activity in Africa. Laurium started out with R100m in assets, and has since grown to around R18bn. It has also added to its headcount over the years, bringing the investment team to 12 out of a total staff complement of 21. The Laurium Long Short Prescient RI Hedge Fund has added a net 12.1% per annum since launch in August 2008 (versus benchmark return of 6.9% from the STeFI) – which amounts to 1.5% more than the South African equity market each year at less than half the volatility. The fund is 6% higher this year to the end of August. “We have been pleased with the fund’s real return of 7% (over inflation) since inception,” says Winckler. “It has also had low equity exposure, with average net exposure of 53% since inception and gross exposure of 145%.

31 October 2017

Celebrating nine years of successful asset management Often when people look at hedge funds they don’t look at volatility, but consistency is important.” The aggressive version of the fund, the Laurium Aggressive Long Short Prescient QI Hedge Fund, has added a net annualised 23% since inception in January 2013. The fund is a net 8.5% higher this year to the end of August. Laurium added long-only funds to its product range in 2013, which have raised meaningful assets, replicating its long books as standalone strategies. It started with the Laurium Flexible Prescient Fund in February 2013, which has gained a net annualised 16% since inception. The fund is ranked no.1 in the South African Multi Asset Flexible Sector (Source: Morningstar Direct 31/08/2017), and continues to provide investors with meaningful outperformance against the South African equity market, with much less downside capture. This illustrates Laurium’s hedge fund qualities and experience, filtering into the longonly strategies. The team also manages the Laurium Balanced Prescient Fund, a regulation 28 compliant multi-asset product, and the Laurium Equity Prescient Fund, which are both comfortably ranked in the top quartile in the relevant sectors since their inceptions. One of the key differentiators as a firm has been our Pan-Africa

SA’s major banks post credible financial results SA’s major banks (Barclays Africa, FirstRand, Nedbank and Standard Bank) produced a credible set of results for the first half of 2017 within a turbulent and challenging operating environment. Johannes Grosskopf, Financial Services Leader for PwC Africa, says: “Despite the range of challenges and the degree of economic uncertainty currently facing the market, the domestic banking system remains profitable, well managed, robustly capitalised and regulated in line with international best practice.

Investment Growth Time Period: 2013-02-01 to 2017-08-31 100,0% 95,0% 90,0% 85,0% 80,0% 75,0% 70,0% 65,0% 60,0% 55,0% 50,0% 45,0% 40,0% 35,0% 30,0% 25,0% 20,0% 15,0% 10,0% 5,0% 0,0% -5,0%

2013-08

2014-02

Laurium Flexible Prescient A1

2014-08

2015-02

97,1%

2015-08

2016-02

2016-08

2017-02

FTSE/JSE All Share TR ZAR

2017-08

59,8%

Source: Morningstar Direct

research capability. In January 2014, Laurium launched the Laurium Limpopo African Equity Fund. The Fund has been able to outperform the African markets by 40% and is one of the top performing African funds since inception. Today the Fund has US$121m in assets both from local and international investors. This year the Limpopo Fund is up 34.5% through the end of August and remains well positioned to capitalise on the market opportunities across the continent. Despite having different mandates, benchmarks, risk profiles and therefore portfolio construction, the management of all of Laurium’s funds is underpinned by a common investment philosophy. We focus

“Although there were some differences in the performances of the individual banks, the four major banks posted combined headline earnings of R35.9bn, up 3.8% from the comparable period last year, but decreasing 4.6% against the second half of 2016.” PwC South Africa’s Major Banks Analysis – ‘Balancing resilience and growth’, analyses the results of South Africa’s major banks for the six months ended 30 June 2017. It also identifies common trends and issues currently shaping the financial services industry, as it builds on previous PwC analyses over the last seven years. “Although macroeconomic headwinds are not new, their scale and volatility in the latest reporting period were significant,” the report states. “Globally and domestically, the banking industry is navigating an increasingly complex world of decisions, risks and opportunities as well as regulatory demands, amid technological advances that are unprecedented in their speed and impact. Business leaders are focusing on the potential impact of technological innovation, in particular artificial intelligence (AI) and robotic process automation (RPA) on their workforce and organisational strategies.”

on long-term wealth creation which includes shorter term trading and appropriate risk management. Laurium Capital has a team of experienced investment professionals that invest alongside the funds. We believe unique features, as mentioned below, will ensure that Laurium Capital will continue to provide our clients with superior risk adjusted returns, for the years to come. • Consistent performance with a disciplined, rigorous investment process • A stable, highly qualified, and competitive team with ‘skin in the game’ • A differentiated approach with a Pan-Africa coverage.

The major banks remain focused on many of the strategic themes PwC has commented on previously, including digitising legacy processes, investing in data management and data analytics capabilities, replacing and retooling legacy system architecture, and channel and product innovation with a view to attracting new customers and enhancing customer experiences through digital platforms.

The report’s main findings include:

• The major banks reported marginal growth in combined gross loans and advances of 0.9% against the second half of 2016 (from R3 477m to R3,10m) • Total non-performing loans fell moderately by 0.5% compared to the first half of 2016 (from R107.4m to R106.9m), and rose slightly by 1.9% against the second half of 2016 • The net interest income line showed the challenges of the current operating environment, staying largely flat • Combined non-interest revenue grew 1.7% compared to the first half of 2016 (from R66.9m to R68.1m).

INVESTING 17

31 October 2017

NICHOLAS KINGHORN Retail Sales, Prescient Investment Management

Diversified multi-asset funds bring stability in an uncertain world

n the current environment where global market uncertainty and political risks impact investment returns, it is pretty stressful selecting which type of unit trust to invest in to achieve your investment objectives. With that in mind, a viable option should be multi-asset funds, which target long-term real returns that are more stable compared to single asset funds. These funds are compliant with Regulation 28 of the Pension Funds Act and offer a wide risk spectrum to investors, depending on their risk appetite. Significant diversification benefits are achieved as different asset classes and currencies are blended together. Statistics released by the Association for Savings and Investment South Africa (ASISA) show that the unit trust industry has cottoned on to this, favouring the funds in the ASISA Multi Asset High Equity category in particular. Within this category, the Prescient Balanced Fund has just surpassed three years of existence, in which time it has performed particularly well. As at 30 June 2017, it ranked in the first quartile over three months, twelve months as well as the period since its inception on 31 May 2014. Remarkably, the Fund has returned 4.85% year-to-date and 7.08% per year since inception, while peer average returns over the same periods were 2.47% and 5.03% respectively. Despite its impressive performance record, the Prescient Balanced Fund is also the cheapest fund in the

CURRENT VALUATIONS SHOW THAT PROSPECTIVE RETURNS FROM MULTI-ASSET FUNDS ARE HIGHER THAN THOSE FROM CASH ASSETS

Sculpture by Beth Diane Armstrong

Prescient Money Mktg 1-4 Tortoise Ad_r3.pdf

Source: Morningstar and Prescient Investment Management

ASISA Multi Asset High Equity classification, with a total expense ratio (TER) of 0.55% and a total investment charge (TIC) of 0.58% a year. On a comparative basis, Prescient’s TER of 0.55% compares favourably to the average categories TER of 1.82%, which consists only of Funds in the category with at least a three year track record. In other circumstances, a 1.27% fee difference could possibly be overlooked. However, in the current low performance environment, investors need to scrutinise charges as expensive performance fees in many circumstances result in negative net of fee returns when gross returns were initially positive. Put differently, fees detract from fund performance and that determines how much cash is left at the end of the investment time horizon. The future is uncertain and of that, we are 7/19/17

sure. However, paying lower fees is one way of ensuring better returns and this is illustrated in the chart, which is based on an initial investment of R1m returning 6.5% per annum for five years, before fees. The Prescient Balanced Fund follows an enhanced indexing strategy that offers a diversified mix of assets and geographic exposure. Accordingly, the Fund targets 55.25% exposure to local equities and 9.75% to global equities. Similarly, the Fund aims for an exposure of 24.75% to local interest bearing assets and 5.25% to global interest bearing instruments. Property makes up the remaining 5%. Based on the asset allocation strategy, the Fund has a return target of inflation plus 5% to 6% p.a. over the long term. The Fund has been a star performer and its investment strategy has placed it squarely in the top quartile of comparable peers.

10:29:17 AM

SLOW AND STEADY WINS, CONSISTENTLY.

At Prescient, we’re in it for the long run. In fact, our first clients are still

our clients. They trust our proven, pragmatic approach; something we call

QuantPlus ® . It’s how we invest – in the past, today, and in the future.

CMY

To know more about any of our products and services, visit www.prescient.co.za

INVESTMENT MANAGEment

PRESCIENT GROUP OFFERING: LOCAL AND OFFSHORE INVESTMENT MANAGEMENT / UNIT TRUSTS STOCKBROKING / RETIREMENT PRODUCTS / UMBRELLA FUNDS / ADMINISTRATION / PLATFORM SERVICES AUTHORISED FINANCIAL SERVICES PROVIDER (FSP 612)

INVESTING

31 October 2017

Now’s not the time to lose faith in multi-asset funds

PIETER HUGO Managing Director, Prudential Unit Trusts

fter three years of low equity returns, investors drawing an income from their investments may be considering shifting some of their portfolio exposure away from multi-asset funds with equity exposure towards cash. However, the appropriate time for switching – if there ever was any – has passed, and retirees are in danger of eroding the longer-term value of their retirement capital should they switch now. This trend towards cash has been evident in SA over the past year in the wake of the higher returns (of around 7.0% p.a.) offered by bank deposits and money market funds compared to riskier equity holdings. Poor equity performance has dragged down the returns of well-diversified multi-asset funds in which many retirees are invested. The average ASISA low-equity multi-asset fund delivered only 6.3% p.a. over the three years to 31 July 2017, and the average ASISA high-equity multi-asset fund returned only 5.5% p.a. over the same period, according to Morningstar. Compare these returns with those of the past 15 years, where high-equity fund returns averaged 12.5% p.a., and low-equity funds averaged 10.0% p.a. The longer-term performances MULTI-ASSET FUND RETURNS OUTPACE CASH OVER 15 YEARS R2 500 000 R2 300 000

Capital

Capital keeping up with Inflation

ASISA Average South African MA Low Equity

ASISA Average South African IB Money Market

R2 100 000 R1 900 000 R1 700 000 R1 500 000 R1 300 000 R1 100 000 R900 000 Jul-02

Jul-04

Jul-06

Jul-08

Jul-10

Jul-12

Jul-14

Jul-16

Source: Morningstar, ASISA and Prudential Investment Managers

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 long-term inflation at approximately 6%. Given their recent underperformance, retirees dependent on income from multi-asset funds may think that they will benefit by moving to cash now. However, they would be getting their timing wrong by being too late. Current valuations show that prospective returns from multi-asset funds are higher than those from cash assets. So by moving to cash now, retirees will be exposed to falling cash returns in future (the SARB has already started cutting short-term interest rates), and will miss out on any improvement in returns from multi-asset funds. The graph shows how a R1.0m retirement investment has performed over the past 15 years (July 2002-July 2017), starting with a 5% annual drawdown and escalating the drawdown by inflation, when invested in different funds. The initial capital investment is represented by the fixed black line. In order to have maintained its real value over time, it would have needed to grow at a rate equal to inflation, to R2.26m (as shown by the red line). Would a money market investment have given the retiree an adequate return over the 15 years? Clearly not: the yellow line in the graph depicts how the R1.0m would have performed invested in the average South African money market fund (the ASISA IB Money Market category) while drawing the income over the period. Due to its low return, the capital would have grown to only R1.25m. Although it would have successfully given the retiree their income (totalling R1.1m), the real value of the retiree’s capital would have been significantly eroded (shown by the gap between the red and gold lines). By contrast, an investment in the average low-equity multi-asset fund is shown by the green line. Although the fund return varies over time, it manages to outperform or remain in line with the inflation requirement (red line) for much of the period. Its more recent underperformance is partly compensated by the earlier excess performance. The retiree ends up with R2.09m, while also having drawn down R1.1m in income payments over the 15 years. From this evidence, it is clear that multi-asset funds have been delivering the returns they are expected to over longer periods, and investors, especially retirees, need to think twice before moving away from them.

Seeking opportunity in overlooked sectors The uncertain global political and economic backdrop created by unexpected recent shocks has spooked investors. However, fear – particularly when spurred by short-term concerns – often creates opportunities, for longterm, contrarian investors. Dan Brocklebank, Director of Orbis, Allan Gray’s offshore partner, believes this is a good time to be investing in stocks that are being shunned due to prevailing market sentiment, such as an aversion to emerging markets and concerns over the actions of President Donald Trump. “While sentiment swings, we do fundamental, bottom-up research to get conviction on a company’s long-term potential. Through our stock picking approach, we have found a number of attractive opportunities within emerging markets.” he explains. “We invest where the biggest discounts to intrinsic value lie. Sometimes whole industries are cheap

and sometimes just a few companies. In general, we find that there are interesting valuation discrepancies in most industries at the moment, resulting in a number of idiosyncratic investment opportunities.” The US health sector presented one such opportunity as Trump’s threat to rip up the rulebook for health care spending had panicked investors and created a lot of uncertainty and negative sentiment within the sector, he says. “We look at stocks on a companyby-company basis, and it was no great surprise to find a couple of babies thrown out with the bathwater – companies in the sector where we think the future is fairly predictable and the market has over-reacted because of fears about what Trump might do. “Our analysts perform in-depth research on a wide range of companies. We then step back and ask ourselves which shares appear to offer the greatest dislocations between the

market price and our assessment of their value.” Brocklebank says South African investors can take advantage of these global opportunities if they are willing to resist the temptation to rush towards the so-called safe havens when things appear to be shaky. Having the willpower to stomach some short-term volatility can lead to pleasing long-term results. Given the track record of the Orbis Global Equity Fund, this strategy has proven itself. A $10 000 investment with the Fund five years ago would be worth $19 567 today, compared with $17 059 from the FTSE World Index benchmark. Orbis has also identified a number of companies in the global ecommerce space, which includes JD.com in China and MercadoLibre in Latin America. “We think what’s missing is that this shift to ecommerce is such a long and gradual process that these companies are not pricing in their long-term potential,” Brocklebank says.

He adds that many investors see China as risky because of slowing growth. It is, however, the world’s largest ecommerce market with sales expected to pass $1.132tn in 2017, according to eMarketer – a digital market research company. MercadoLibre, the ecommerce giant of Latin America, is another opportunity despite the ‘noise’ in the region. “A lot of investors see MercadoLibre and say: ‘It’s an emerging market stock and we don’t like emerging markets at the moment’. Accepting some uncertainty lets us seek protection against losses in the best way we know – buying assets for less than we think they are worth,” he says. Dan Brocklebank, Director, Orbis

INVESTING 19

31 October 2017

Top 10

residential estates in SA

INSIDER CHRONICLES ADRIAN MEAGER General Manager, Asset Management, Warwick Wealth

Offshore investing: a South African perspective

ey reasons to invest offshore include: diversification of risk, geographic spread, increased investment opportunities and rand hedging. • Diversification: Diversification allows investors an opportunity to spread risk over more than one market with investments in both established and emerging markets. A balance of both higher-risk and lower-risk market exposures can provide the growth investors need without taking on excessive risks. • Geographic spread: Geographic spread is investing in different countries at different stages of their growth cycles. Diversifying across several economies is regarded as a way of smoothing out returns. The South African stock market constitutes around 2% of the world stock market capitalisation, with emerging markets being about 8%; thus it is prudent to invest in larger and more mature markets and not only in emerging markets. • Increased investment opportunities: The offshore investment arena provides increased opportunities, since investors can invest in various countries, products and industries.

• Rand-hedging: Diversifying globally could increase inflation-beating returns. When exchange controls were relaxed in 1997, the rate of exchange was R4.60 to the US dollar. Today this represents a 180% depreciation of the rand against the US Dollar over the following 19 years. Indications are that the rand will continue to devalue against the major developed currencies, thereby creating additional inflation protection. Investors do not always fully understand the different ways to incorporate offshore assets into their portfolios. There are, however, three ways: • Asset Swaps: Most asset managers, life insurance companies and stockbrokers are allowed to invest a portion of their assets offshore. Should they not utilise the full allowance of their capacity, it is often allocated to investors. Your funds are physically invested offshore in a vehicle of your choice, in your chosen currency, but the institution would need to repatriate your funds back to SA when you want to redeem funds. • Feeder Funds: This is a local unit trust that invests all its assets into an offshore fund or fund-of-funds,

with a small portion retained in rand to provide liquidity. The investment is made in rand, is reported in rand and redeemed in rand, while enjoying the gain or loss from both the performance of the fund and the movements in the underlying currency. • Foreign capital allowance: All taxpaying individuals in good standing with SARS over 18 years of age have a single discretionary allowance of R1m and a foreign investment allowance of R10m available for investment purposes. The funds are physically invested offshore and may be invested into a broad range of assets, similar to the asset swap, except that the funds do not need to be repatriated, unless you choose to do so. These three options largely achieve the same results, however, there are some important differences, for example: • Your foreign investment allowance may be retained offshore indefinitely • Feeder funds may be taxed on the rand gains or losses when you redeem all, or part, of your investment • Asset swaps and foreign investment allowances are generally taxed on the base currency gains or losses.

AfrAsia Bank and New World Wealth have released their list of 2017’s top 10 residential estates in South Africa.

Val de Vie (Paarl) House/apartment prices from R3 million to R50 million.

Steyn City (Johannesburg) House/apartment prices from R2 million to R30 million.

Zimbali (Balito) House prices from R5 million to R50 million.

Fancourt (George) House prices from R3 million to R50 million.

Waterfall Equestrian Estate (Johannesburg) House prices from R10 million to R70 million.

Steenberg (Cape Town) House prices from R5 million to R35 million.

Mjejane (bordering Kruger Park) House prices from R5 million to R30 million.

Whalerock Ridge (Plettenberg Bay) House prices from R3 million to R35 million.

Waterfall Hills Retirement Estate (Johannesburg) House prices from R3 million to R6 million.

Fransche Hoek Estate (Franschhoek) House prices from R10 million to R60 million.

INVESTING

31 October 2017

Portugal popular with foreign investors

oreign buyers see Portuguese property as astonishingly good value. That’s the word from James Bowling, CEO of Monarch&Co, a facilitator of residency and citizenship by investment programmes in several territories around the globe. Reduced threshold The government of Portugal recently agreed to allow a reduced real estate investment threshold of just €350 000 on Portugal’s Golden Visa Programme for properties that are: • At least 30 years old • In need of refurbishment • Situated in areas scheduled for urban regeneration. “This means that non-EU nationals and their immediate family members can now apply for Portuguese residency and citizenship by investing in real estate at the reduced amount, provided the real estate meets the criteria above,” says Bowling. An investment of €500 000 is required for real estate not meeting these criteria. Property prices increasing In a recent meeting with government, Portugal’s Minister of Foreign Affairs, Augusto Santos Silva, said the Golden Visa Programme yielded more than

€2.2bn of investment for Portugal since 2012. This makes the values and authorisations granted the highest ever for Portugal. The number of new residence permits approved averaged 136 per month, except for May and June, which saw an average of 157 approvals each month. Commenting on why Portugal is such a popular choice for African investors, Bowling said property prices are increasing at almost double the European average. “While other European Union countries registered 4% growth on property indexes, national prices registered growth of 7.9% for the first quarter of 2017. “This is set to rise to as much as 30% in the coming months due to Portugal’s unique position to offer political and social stability to foreign investors,” says Bowling. Good value Foreign buyers see Portuguese property as astonishingly good value. “According to latest reports, Algarve, which is known for its Mediterranean beaches and golf resorts, had the most expensive housing in Portugal, with an average house price of €1 358 per sqm in October 2016.

“Algarve was followed by Lisbon Metropolitan Area and Madeira with average house prices of €1 308 per sqm and €1 205 per sqm respectively.” Value is also the main reason for the current appetite in Lisbon. “The best prime central properties sell for less than half the equivalent in Paris or London,” says Bowling, who is seeing hotel developments with rental guarantees of 4% and golf estate developments with rental guarantees of 5% in Portugal on the books. “The majority of Golden Visa investors purchase for investment, but with a longer-term view to make Portugal, or the EU, a permanent home. “Overall, the programme’s success has been attributed to its investment criteria, reputation and residency leading to citizenship in a safe and secure mainland European country.” Foreign investors are not required

to emigrate, and only need to visit Portugal for seven days in the first year of residency and on average seven days per year thereafter. Currently, the highest numbers of investors come from China, Brazil and South Africa. “Now that the Global Peace Index is rating Portugal as the third safest city in the world (next to Iceland and New Zealand), we can expect to see an even higher number of South African applicants looking to hedge their lifestyle abroad,” says Bowling.

James Bowling, CEO of Monarch&Co

Residency And/Or Citizenship Options EU Countries

Cyprus Residency • €300 000 Real Estate Investment • Three-year fixed deposit of €30 000 • Residency in approximately two – three months • Required to visit Cyprus at least once every two years. Cyprus Citizenship • €2 000 000 Real Estate Investment • Can be sold in three years, however must maintain a permanent residency of a minimum value of €500 000 • Citizenship in approximately three months • Visa-free or visa-on-arrival travel to 180 countries / territories globally. Greece Residency • €250 000 in Real Estate Investment • Residency permit issued in two months • Investor can apply for citizenship after seven years of permanent residency in Greece • Visa-free travel within Schengen member countries. Malta Residency • €30 000 to Government of Malta • €270 000 - €320 000 Real Estate Investment • €250 000 Investment to Identity Malta

• Earn an annual income of minimum €100 000 outside of Malta or own capital of minium of €500 000 • Visa-free travel within Schengen member countries. Malta Citizenship • €650 000 (at least) Non-refundable contribution to National Economic & Social Development Fund • €350 000 Real Estate Investment • €150 000 or more in stocks, bonds or debentures • Visa-free or visa-on-arrival travel to 187 countries / territories globally. Portugal Residency & Citizenship • €350 000 or €500 000 real estate investment • Travel requirements; seven days in first year and 14 days per following two-year renewal periods • Seven years to citizenship • Citizens enjoy visa-free or visa-on arrival travel to 193 countries/territories globally and residents visa-free travel within Schengen member countries of Europe • Must hold investment for five years.

CARIBBEAN ISLAND COUNTRIES

Antigua & Barbuda Citizenship • US$400 000 Real Estate Investment, or US$200 000

contribution to National Development Fund • Citizenship in three – six months • Investors are required to visit for at least five days within the first five years • Must hold investment for five years • Visa-free or visa-on arrival travel to 159 countries / territories globally. Dominica Citizenship • US$200 000 Real Estate Investment, or • US$100 000 – US$225 000 non-refundable contribution to Government Fund • Citizenship in approximately three – five months • Visa-free or visa-on arrival travel to 141 countries / territories globally. Grenada Citizenship • US$350 000 Real Estate Investment • Must be held for three years • Citizenship in three months • Access to live and work in USA through E-2 Investment Visa • Visa-free or visa-on arrival travel to 145 countries / territories globally.

Source: Monarch&Co

INVESTING

31 October 2017

GARY MCNAMARA Portfolio Manager, Sanlam Private Wealth

The case for dividend investing

ncreasing numbers of investors have enquired of late whether investing for dividends is still a good strategy. The answer is always ‘yes’. Despite dividend withholding tax, (which was hiked from 15% to 20% in February this year), the case for dividend investing remains strong and patient investors are likely to be well rewarded. The main benefit of investing for dividends is that investors can be provided with an income by being paid a portion of companies’ profits each year in cash without having to sell shares. This type of investment strategy is ideal for retired people who need to live off their investments. If a company can grow its profits at a rate better than inflation and generate a real return, investors should be able to watch their yearly income grow without having to change their strategy too much. Dividend withholding tax unfortunately wrests away some of the benefits of this strategy. One option to counter this is to hold the investment in a retirement-type structure such as a living annuity or, if you haven’t yet retired, a retirement annuity. Both of these structures would receive the dividend

declared gross of dividend withholding tax. This will allow a greater amount to compound if the investment is held in a retirement annuity, and won’t force a sale to generate income if the vehicle is a living annuity. The key to a dividend investment strategy is holding a portfolio of high-quality shares that have proven their ability to grow profits at a real rate and have a track record of paying out a certain portion of these profits in the form of dividends to shareholders. These types of shares tend to be high cash flow and less cyclical companies, making the forecasting of earnings and dividend growth easier. In the South African market, banks and life companies have a good track record in this regard. The likes of British American Tobacco and cellular providers could be added to this list – food producers and retailers are also long-time favourites of those following this investment strategy. A company’s so-called payout ratio, or dividend cover, is an important factor in that it will allow it to pay dividends but still have sufficient capital to grow the business. If a company is paying too

much in dividends or even worse, borrowing to maintain its dividend level, the share should not be held in a dividend income portfolio. Companies that depend on a particular business cycle or commodity price to drive profits are unlikely to provide smooth earnings – hence a certain dividend is more difficult to forecast and investors using this strategy should avoid the share. All in all, the case for dividend investing has been proven over time, with dividend returns comfortably outperforming the newer growth industries and more cyclical stocks. In the South African market, this investment strategy has returned a dividend yield of around 5% gross of fees. It has also often been proven to provide a smoother total return, (dividends plus capital), when bear markets prevail. Taking a long-term view of investments, and not jumping from one investment strategy to another, is one of the basic tenets of successful investing. Approaching dividend investing with this in mind – allowing dividend yields to grow over time – will stand patient investors in good stead in the long run.

Are platforms morphing into tech companies?

While the spend in South Africa is nowhere near that of the UK, many South African investment platforms are facing technology challenges that will require, by South African standards, a fairly large cheque to be written. There are a number of factors driving the increased tech spend. One of these is the increased focus on the user experience as clients and advisers become more digitally focused in their everyday life. Think about banking. When last did you visit a bank branch to transfer money from one account to another? Why should your experience with your investments be any different?

Unfortunately, investment platforms have been a bit behind the curve in making it simple and convenient to use online functionality as the norm and are now being forced to play catch-up to deliver a world-class digital experience. This comes at a cost though, as systems and long-run business processors need to be reconfigured. A second and related factor is the increasing demand for the availability of different investment types on investment platforms, as advisers look to consolidate clients’ investments onto a single platform. With this comes complexity and the related systems build cost. So what, you may ask? If platforms are spending on tech HOW THE COSTS STACK UP then it’s good for me as an adviser and for Replatforming cost (m) Platform Assets (bn) my clients. That may Ascentric £5.74 £10.10 be so, but there are a Alliance Savings Trust £7.43 £8.50 number of important Aviva £35 £8.20 questions advisers Funds Network £250 £60.17 should be asking concerning their Old Mutual Wealth platform £450 £40* chosen platform’s Cofunds £80 £76.90 tech strategy. First Total £828.17 £203.87 of all, what is the likely impact on *Source: Old Mutual - Source FINALYTIQ

the advisers and their clients, and are advisers likely to be inconvenienced or require changes to their existing business practice? Secondly, does the chosen platform have the required resources to pull off tech rebuild? And finally, who is funding it? As we’ve seen in the UK examples, replatforming can be expensive and advisers should be asking if the platform has the necessary scale and backing to achieve the desired outcome. Investment platforms face a conundrum in that for many of them, this requirement to spend massively on their systems comes at a time when they are not making money. They also need to invest to operate more efficiently to be financially sustainable. Financial advisers should consider the financial strength and sustainability as part of a due diligence process when considering which platform to use. Ultimately, with the way that the world is moving, platforms that don’t have a clear technology strategy and the ability to achieve it, may well end up like the bricks and mortar banks of yesteryear.

INVESTING LISPs

DARYLL WELSH Head of Product, Investec Investment Management Services

ecent headlines from the UK highlighted the enormous sums of money being spent by UK investment platforms in upgrading their technology. According to a recent article, Old Mutual Wealth has spent in excess of £300m on upgrading the technology (often referred to as re-platforming) that drives their platform. By the time the upgrade is complete this number is expected to come in at around £450m. As the table shows, Old Mutual are not alone in soaring investment platform costs. Given these exorbitant numbers, advisers and their clients could be forgiven for thinking that platforms are evolving into technology companies.

INVESTING LISPs

KIM JOHNSON Investment Specialist at Tailored Fund Portfolios, Old Mutual Wealth

31 October 2017

The growing popularity of Lisp platforms

linked-investment services provider (Lisp) is a financial institution that packages, distributes and administers a broad range of investment products, which may vary from unit trust funds, to model portfolios and life insurance products such as endowments and retirement annuities, preservation funds and living annuities. Through using a Lisp platform, you have the benefit of accessing a range of different investment managers via one source that caters for the full range of investment needs. Investment platforms act as intermediaries between investors and the investment fund providers, offering a simple and cost-effective way to manage a range of investments provided by different asset management companies. The convenience of using a Lisp platform has become increasingly popular which is reflected through the continuous growth of assets under management over the last decade. According to ASISA statistics, assets under management on Lisp platforms in South Africa have increased from R267bn as at the end of June 2008 to R1 258.4bn as at the end of June 2017. The largest Lisps include Allan Gray, Glacier, Old Mutual Wealth, Investec, and Momentum respectively. Between them they have accumulated 69.2% of the total market share of South African Lisp platforms. The advantages of investing through a lisp platform • Ease of use: There is only one client code for all investments across various asset managers. • Choice: Lisps provide access to a variety of solutions including unit trusts, model portfolios and personal share portfolios. • Convenient transacting: Switching from one investment to another is all done in one place, which means no exposure to time out of the market while waiting for funds of the disinvestment. • Reporting: Lisp platforms can report performance and costs of selected funds in a consolidated report and you can monitor all funds in the investment portfolio consistently. Therefore, funds can be compared against each other using a standard methodology. This also allows ease of consolidation when reporting on capital gains and income tax. • Legal protection: The administrator of a Lisp platform cannot hold assets directly and therefore assets are usually held by a nominee company. As you are invested in a protected fund and not in the company, assets are safeguarded and cannot be attached to creditors should the asset manager face bankruptcy. • Cost efficiency: Lisps usually charge fees as a percentage of an investment, and some have a sliding scale or tiered structure where the fee percentage depends on the size of the investment. Therefore, the larger your investment, the more cost-effective using a Lisp platform becomes and it is often cheaper than investing directly with individual asset managers.

Considerations GROWTH IN AUM ON LISP PLATFORMS of being spoilt for choice Although having choices is a good thing, it can become overwhelming for a financial adviser or an investor. With approximately 1 500 South African unit trust funds, no adviser has the time or expertise to do Source: ASISA Stats – June 2017 a proper investigation to find the right fund or combination of funds for a particular portfolio. Delivering superior returns PERCENTAGE (%) MARKET SHARE AT THE END OF JUNE 2017 sustainably is directly correlated to how well a portfolio has been constructed, considering the emerging retail distribution review (RDR) legislation which aims to ensure delivery of suitable products and advice. The number of advisers outsourcing investment decisions to discretionary fund managers and model portfolio providers has been rising in recent Source: ASISA Stats – June 2017 years, driven primarily by an increased focus on managing investment risk and costs. Advisers are increasingly looking Models can help you streamline your investment to move away from traditional fund selection book and consolidate into fewer funds. Some Lisp towards using model portfolios that outsource platforms also offer the additional service to many aspects of portfolio construction and assist with the transition of investment books manager selection to a discretionary fund to align to their model portfolios. manager (DFM). Model portfolios are used to DFMs also offer bespoke models that are build a unique range of investment solutions that branded and exclusive to their client base. complement the advice process and meet clients’ Through utilising a model portfolio solution, you financial objectives. can offer clients a packaged unit trust solution Old Mutual Tailored Fund Portfolios, Analytics, including a well-researched combination of asset Morningstar, Fundhouse and Sanlam Implemented managers with a proven track-record of consistent Consulting are some of the well-known DFM performance, while avoiding the expensive retail solutions in South Africa, underpinned by intense fees of investing directly into unit trusts. research, marketing, investment administration and regulatory support to enable financial advisers Peace of mind that you to address the pressures to build a sustainable and are on the right track future-fit practice. There is a growing trend towards creating a level The majority of IFAs do not only rely on one of professionalism when providing financial advice platform but instead use multiple platforms. As to clients. Through partnering with a cutting edge DFM models are platform independent, this Lisp platform and reputable Discretionary Fund allows the client access to model portfolios on Manager, you, in your role as financial planner, various platforms. The portfolio asset allocation can focus on what is most important to clients; and manager selection will be identical across namely providing excellent advice that gives your these different platforms, allowing for all clients clients the comfort of reaching their financial goals. with the same investment risk to be invested in Through partnership with an investment platform the same way. You may have a preference for and DFM, you can rest assured that you are where you want to manage model portfolios, investing in professional investment management, usually driven by your client’s current preference. administration and regulatory support processes.

Kayalethu Nodada Co-Fund Manager Old Mutual Equities

We believe that when you are personally invested in something, you are even more driven to make it succeed. That’s why Kayalethu Nodada invests his own money alongside yours. Kayalethu is part of the Old Mutual Equities boutique, which manages South Africa’s longest running unit trust in the country - the Old Mutual Investors’ Fund. The fund has delivered a return of 8.1% above inflation since inception. But this is more than just Kayalethu’s success, it’s yours too. Invest where the fund managers invest by contacting an Old Mutual Financial Adviser or your Broker, call 0860 INVEST (468378) or visit www.oldmutualinvest.com/asinvested

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 (www.fsb.co.za) to provide intermediary services and advice in terms of the Financial Advisory and Intermediary Services Act 37 of 2002. Old Mutual Unit Trust Managers (RF) (Pty) Ltd is a registered manager in terms of the Collective Investment Schemes Control Act 45 of 2002. The fund fees and costs that we charge for managing your investment are accessible on the relevant fund’s Minimum Disclosure Document (MDD) or table of fees and charges, both available on our public website, or from our contact centre. The Net Asset Value to Net Asset Value figures are used for the performance calculations. The performance quoted is for a lump sum investment and in respect of the Old Mutual Investors’ Fund. The performance includes income distributions prior to the deduction of taxes and is reinvested on the ex-dividend date. Actual performance may differ as a result of actual initial fees, the actual investment date, the date of reinvestment and dividend withholding tax. Past performance is not a guide to future performance. Annualised returns are the weighted average compound growth rate over the performance period measured. The actual highest, average and lowest 12-month return figures since inception to 31 July 2017 are 96.0% (highest), 19.6% (average) and -45.7% (lowest). The fund was launched on 01/10/1966. Morningstar and Old Mutual Investment Group calculated the performance of the fund as at 31 July 2017. Old Mutual is a member of the Association of Savings & Investment South Africa (ASISA).

LB 114450L/1

THERE IS NO STRONGER MOTIVATION TO SUCCEED THAN BEING PERSONALLY INVESTED.

INVESTING LISPs

31 October 2017

Glacier launches new Investment Hub

lacier by Sanlam, one of the leading investment providers in South Africa, has launched a new Investment Hub to improve efficiencies for its intermediaries. This new way of working means intermediaries can spend less time processing information, and more time getting results. “We’ve been on a big drive to look at how we can improve efficiencies for both the client and the intermediary because as an industry, we must continue to strive to bring down the costs of delivering benefits to our investors,” says Glacier’s Head of Product Management, Patrick Sheehy. “This adoption of this new technology is one way we can bring the cost down.” Glacier began work on the Investment Hub 20 months ago, intent on building a platform to deliver a system that avoids the need to have to sign or complete a piece of paper, “with the idea in mind that both intermediary and client should be able to engage electronically from the very initial point of contact to the final signing of an application form and then to its submission to the product provider.”

Sheehy says one of the key objectives of the Investment Hub is that the intermediary, holding information in digital format, “should never have to recapture that information, leaving less scope for errors.” The Glacier Investment Hub will enable intermediaries to spend more time with their clients, answering questions and allaying their fears, “particularly in the current economic conditions which remain challenging.” Sheehy explains that the Investment Hub has five key features: • Intermediaries can manage client information easily by creating and maintaining details from one central place. They can also import clients from their own client management system and store a variety of client documents • Intermediaries are able to create model portfolios by selecting funds, allocating percentages and defining the risk levels and benchmarks. They can also analyse and compare different portfolios and wrap funds as well as create customisable reports to present to clients • Intermediaries are able to prepare a

With Glacier’s new Investment Hub, doing less means you can do more.

GLACIER FINANCIAL SOLUTIONS (PTY) LTD AND SANLAM LIFE INSURANCE LTD ARE LICENSED FINANCIAL SERVICES PROVIDERS.

quick quote or customised proposal for the client’s new or current investment. The application form can be completed through an easy to use web-based front-end that will guide intermediaries through the steps • Intermediaries may submit investment proposals and applications with a straight-through, paperless process and allow clients to sign digitally. When filling in information, they won’t need to recapture data such as client details • An intuitive dashboard helps intermediaries manage their workflow and digitally track all cases, allowing them to view previous actions and alerting them to any tasks that are outstanding. What is important about the Investment Hub is that Glacier has developed what users want. “Often, technology is developed where there has been no consultation with the users.” Glacier has taken a very different approach. “We contracted 150 intermediaries informally around the country and

asked them to be part of our journey. That process allowed us to develop the new system with the knowledge that it would work for them. We like to think that while we conceived the system, many aspects are designed by our intermediaries.” So far, the take up has been very good, Sheehy says. “To date, we’ve received positive feedback about the functionality and ease of use. “I should make it clear, though, that we haven’t shut down the old systems and we’ve been very clear about this. We’ll keep the old system running for a while in order to allow time for the adoption of the new system.” Sheehy points out that Glacier, in terms of this technology, has embarked on a journey that has no ending. “Our view is that the technology should be constantly improved.”

Patrick Sheehy, Glacier’s Head of Product Management

Glacier’s Investment Hub has key features that enable financial advisers to: • • • • •

Manage client information easily Create and analyse model portfolios Generate customised investment proposals Enjoy a straight-through process for paperless applications Manage workflow with a helpful and intuitive dashboard

This new way of working has less paperwork and better data management – giving you the power to get things done on your own terms. Visit www.glacier.co.za for more information.

31 October 2017

he word ‘retirement’ refers to leaving formal employment or stopping all income generating activities. Legally, retiring refers to your tax status and access to your retirement savings in terms of the post-retirement investment vehicle options available. But have human beings always reached a point in their life where they stop earning an active income? Historically, we just did not live long enough to even consider the possibility of stopping working. In the 18th century, life expectancy was only 35 and rose to just above 50 when Alexander Fleming discovered Penicillin in 1928. Consequently, people simply worked as much as they physically could until they died. In addition, saving was incredibly onerous as economies were dominated by a subsistence lifestyle. Feudal style taxes were paid to maintain the central powers rather than channeled back to the citizens and financial systems for saving were rudimentary at best. ‘Inventing’ retirement How then did retirement come about and why at age 65? The person generally credited with ‘inventing’ retirement as we know it, is Chancellor Otto Von Bismarck in 1883, but his objective was mostly to increase his popularity with his people, and to stem the tide of rising Marxism in Europe. He announced that he would pay a pension to any citizen of the age of 65. This was well past the life expectancy of the population in the 1880s and therefore a relatively safe bet for the government purse. In addition, the Industrial Revolution had sparked a trend of urbanisation, funneling people out of rural life and into industrial and business cities. Scientific motivations were put forward where people were beginning to be classed as less productive due to reduced physical ability of people to work after age 60. Retirement as an economic necessity Retirement therefore gained popularity as an economic necessity as people started living longer, unemployment took hold after the 1929 Great Depression and young men returned from both the First and Second World War seeking jobs. In 1935 Franklin D. Roosevelt proposed the Social Security act where workers had to pay for old-age insurance for their own future. Retirement had become an economically attractive option to push the ‘elderly’ out of work, making way for new job seekers and leisure was motivated as the reward for years of hard work. Retirement in SA South Africa formally joined the retirement system of employer-based retirement plans with the passing of the Pension Funds Act in 1956. The Defined Benefit Scheme was initially the preferred structure. However, though it was a great model in boom times,

Is retirement inevitable and sustainable in modern times? it represented a significant and possibly crippling risk for both employers and employees alike during difficult economic times. Since the turn of the century, there has been a significant migration to Defined Contribution Schemes, where retirement savings are completely separated from the employer, and more responsibility shifted to the employee. The role of the employer has changed from a paternalistic one to that of a supportive facilitator. The employee in turn, is given a more central role in determining their own retirement outcomes, necessarily taking more responsibility and risk. Ironically, having both the time and the savings to fund a leisure lifestyle in retirement still is the exception rather than the norm. Currently only 2% of the working population can afford to retire and maintain their current lifestyle and only 10% can afford to stop working (retire) at all. Most people have no choice but to find some other means to create an active income. This is evidenced by the number of retirement fund members cashing in their retirement savings (roughly 80%) to make provisions to create income earning opportunities both pre- and post-retirement. Fortunately, the nature of work opportunities has evolved from labour-based to knowledgebased jobs. In agrarian-dominated economies, a person’s value was based on physical strength. When we were no longer able to labour at our peak, we could not afford to simply stop working. Rather, older people moved to less labour intensive roles such as managing the allocation of resources and labour, and were called on to take important decisions for their family or community. They were the elders in the community by virtue of the experience and wisdom required to reach old age, earning the right to take up knowledge-based work, accepting greater responsibility for the well-being of their family or community.

As the level of education of the general population has improved, the opportunity for more knowledge-based functions have increased as mechanisation reduces the demand on our bodies. This affords us more time and energy for problem solving and knowledgebased endeavours to such an extent that there are serious debates around the nature and future of work itself. Thus, the factors determining the possibility to stop working have not changed, except we now expect to stop working, retire and live a life of leisure. As suggested, it was the wealthy that could afford to do so – 90% of the current working population still cannot afford to stop working. Savings rates The key to retiring is for savings rates to steadily increase to an amount equal to the amount of consumption required when active income stops. That effectively means to delay consumption over one’s working career enough to sustain consumption when one stops working. If we follow the Pareto principle (the commonly referenced ‘eighty-twenty’ rule), savings rates should reach an equilibrium at about 20%. The Alexander Forbes Pension Index indeed shows that to achieve a 75% income replacement ratio at 65, one would need to save just under 20% over one’s working career of 40 years. Sufficient government policy intervention, such as tax incentives to delay consumption and reduced access to retirement savings, should be able to influence this natural equilibrium level to a more favourable outcome, i.e. more people who can afford to retire. The increased access to retail debt facilities has meant consumption is not being delayed but rather accelerated by spending tomorrow’s income today. Spending on debt has steadily increased and has reached the 80% mark. This is unsustainable, as we saw in the 2008 sub-prime crisis. It is therefore no coincidence that we find 80% of pensions being cashed in. As a result, savings rates have not reached the equilibrium levels required to sustain the retirement system. To avoid a potential impending retirement crunch, saving needs to be made easy and automatic. A possible solution may be to focus on where we are with what we have. The ideal would be to focus on the knowledge, skill and capability of the individual (especially as the nature of work continues to evolve), rather than making age the eligibility criteria to work. To improve retirement for all, we should consider the previous natural state of affairs where an individual only stopped working when they were no longer sufficiently capable to do so. As a secondary objective, we can then focus on getting people in a position where they have enough resources to purchase a life of leisure.

EMPLOYEE BENEFITS

MARK HAWES Financial Consultant, Alexander Forbes Financial Planning Consultants

EMPLOYEE BENEFITS

HEALTH MEDICAL AIDS

31 October 2017

NHI needs medical schemes to survive

t is imperative that measures are put in place to allow medical schemes to work in tandem with the National Health Insurance (NHI), so that value for money is achieved and duplication of costs prevented. This is according to Gerhard Van Emmenis, Principal Officer of Bonitas Medical Fund. “We, therefore, welcome the efforts of the NHI to improve access to healthcare. However, our key concerns are around quality and preventing duplication of services. “If the future means there is only complementary cover from medical schemes then it will be very limited in its offerings with cover for services such as dentistry and rare conditions. This means that the number of medical schemes will greatly reduce.” Van Emmenis explains that clarity is needed around whether people will be prevented from belonging to a medical aid scheme. “The funding model for the NHI means that everyone will contribute towards the NHI through a tax-based system but, if you still choose to belong to a medical scheme then it’s your choice and a cost to you from your after tax money. The predicated scenario is that the contribution to a ‘private’ medical scheme will be significantly less through price and other regulation, making the schemes more affordable while, at the same time, using current medical scheme spending to cover vulnerable groups.” The private healthcare sector In 2016, Statistics South Africa estimated that 1 515 000 households with no medical aid normally used the private healthcare sector and 706 000 households, where at least one member had medical aid, used the public health sector. In total, 4 679 000 households’ normal place of consultation was the private sector.

“The reality is that many people use a combination of both sectors,” says Van Emmenis. “This means the number of people with medical aid does not equate to the number of people using the private health sector. The converse is also true with some medical scheme members using public hospitals or state clinical protocols for the treatment of specific conditions such as tuberculosis.” The role of medical schemes Acting Managing Director of the Board of Healthcare Funders (BHF), Dr Clarence Mini, says he believes there should be more debate about the role of schemes in the future. “Since 2008 we have supported the idea of the NHI and believe that it is in the interests of the greater good of everyone – and not just the 16% who belong to medical schemes. But we believe medical schemes have a bigger role to play and should not be side-lined. For example, we think it is a mistake to use a single-funder system.” A ‘multi-payer’ system would mitigate a lot of risk and is one of the ways that the private sector can lend their expertise to the Government regarding the setting up and management of pooled money within the NHI. “The Road Accident Fund is an example of what happens when you have one funder, when that funder goes down you’re in trouble,” Mini says. Van Emmenis echoes this sentiment. “For the NHI to be a success, collaboration between medical schemes and Government is essential. There needs to be agreement on the roles of both players as well as which benefits will be covered by the NHI and which can be offered by the medical schemes.” But what can medical schemes offer that NHI can’t? It must be conceded that irrespective of how comprehensive the NHI will be, some healthcare services will not be covered. This includes mental health and certain dental benefits.

• Timeous service According to the White Paper, NHI will be rolled out in priority areas first. The initial priorities include healthcare at schools, childhood cancer, women’s health (including pregnancy, cervical cancer and breast cancer), disability and rehabilitation services, and hip, knee and cataract surgery for the elderly. But what about the remainder of the population? “Medical schemes offer a number of benefits that are immediately available to members. This allows members to access the care they need, when they need it. If the NHI is to be rolled out to specific target groups first, what becomes of others in need?” asks Van Emmenis. • Management of chronic diseases Medical schemes often cover a range of chronic diseases through managed care programmes which equip members to manage their condition more effectively. “We’ve seen improvement of 72% in Bonitas members with chronic diseases – especially diabetes and HIV,” says Van Emmenis. “Quality of care is a central theme for us and we are pleased that our initiatives in this regard are bearing fruit. Engagement, collaboration and negotiation with healthcare professionals and service providers enable us to develop innovative solutions that ensure our members have access to care of the highest quality and receive maximum value for money.” • Functional administration Existing medical schemes and administrators look after millions of South Africans and that capacity does not yet exist in the public sector. Managing the healthcare needs of 55 million South Africans will be an administrative nightmare and further drive up costs. • Preventative measures A key healthcare challenge is finding a way to identify pre-cursors for serious chronic health conditions and intervening before the onset of disease. While NHI makes provision for preventative care, it is not clear what this will entail. “Bonitas uses an innovative emerging risk model which identifies members likely to develop chronic conditions. We then conduct a series of interventions to prevent the development of these or help members to mitigate their severity. This includes access to health coaches, education material and reminders for tests,” explains Van Emmenis.

Gerhard Van Emmenis, Principal Officer of Bonitas Medical Fund

HEALTH MEDICAL AIDS

31 October 2017

DAMIAN MCHUGH, Head: Health Marketing, Momentum Health

ealth is the most critical aspect of financial wellness or financial security for a consumer. There isn’t another financial solution which is as emotive as healthcare. As such, we have yet to come across a consumer who would not give up all their financial assets for a loved one if they were diagnosed with a serious illness. This is why ensuring that you have the most cost effective medical aid cover that meets your needs, is imperative. From September to December each year, medical schemes launch their benefit enhancements and increases in contributions for the following year. This provides the members with an opportunity to review their current situation and establish whether their current benefits and medical scheme offering is flexible enough to meet their individual medical needs, as well as their affordability. In consultation with their financial adviser, medical scheme members normally review their option at the

Flexibility key in meeting individual consumer needs

end of each year. During this review, the financial adviser should conduct a full needs analysis that focuses on your medical needs, as well as your affordability, and then match these to specific benefit options. This is where flexibility within your medical scheme becomes key. Does your medical scheme allow you to structure a plan that meets your needs or are you limited by their benefit design? We often see that members are over-insured, where they are paying for benefits that they aren’t making use of. The money they are paying for these unused benefits could be put to better use, especially in these tough economic times. Wouldn’t it make more sense to be able to decide how much cover you need and fund exactly for that, and by doing so only pay for the benefits you actually need? Unfortunately, due to complex medical scheme benefit design, these members often downgrade their benefit option, but in so doing they forfeit other benefits that they could possibly need. Changing

medical schemes is not always the best option either, as you could be subject to underwriting which could leave you exposed in terms of cover for a predetermined period. This is why flexibility plays such an integral part in the Momentum Health product range. We are driven by the needs of the consumer and want to allow them the freedom of choice to be able to structure a medical scheme option that caters for their

individual needs and affordability. This flexibility is offered through Momentum Healths provider choice. Momentum also offers Momentum Health members the opportunity to fund their day to day expenses by being active and earning HealthReturns. Such innovative complementary product offerings are designed to enhance our clients’ financial wellness, in addition to ensuring that they enjoy the most appropriate medical cover.

Momentum Health, where affordability and choice meet. Download the Momentum app for easy access to all your products and benefits. Visit momentumhealth.co.za for more.

For your health and financial wellness

HEALTH MEDICAL AIDS

31 October 2017

Medical aid scheme trustees ‘on-course’

he Board of Healthcare Funders of Southern Africa (BHF) has launched a nationally recognised Trustee Development Training certification to support the medical schemes industry. The training programme is accredited by Wits Business School. With the global move towards universal healthcare and South Africa’s implementation of National Health Insurance, trustees have an extremely important role to play in making strategic decisions that are in the best interests of their scheme members, as well as broader society. While trustees are often skilled professionals and

specialists in their own right, this short course is highly relevant because it focuses on the specific needs of medical scheme trustees, particularly as regulatory demands become more onerous and an in-depth understanding of issues facing business and the broader industry is required. The roles and responsibilities of trustees have frequently come under the spotlight, with calls for the regulator to explore the possibility of providing training to them and then to set a formalised minimum education level. A further challenge for the industry is that people sign up to become trustees without fully understanding the rigorous governance issues and complexities involved in overseeing medical schemes. “The spectrum of knowledge required from trustees is broad and includes sound knowledge of the industry regulations and trends – as well as the wider landscape such as National Health Insurance,” explains Zola Mtshiya, Marketing and Communications Manager of the BHF. Apart from medical scheme trustees, this development programme is aimed at principal officers, scheme management, HR, legal and forensic persons who are often engaged in scheme activities. The BHF encourages industry peers to

take up this training in order to ensure that this broad group of people has covered all the latest knowledge on best governance principles – from legal issues, medical scheme business aspects, health finance models, health and corporate governance, fraud, waste and abuse in healthcare and the law relating to medical schemes. The BHF’s first training programme was run in March 2017 with 19 delegates signing up from nine different medical schemes. With an 84% pass rate, 16 delegates received a nationally recognised NQF 7 certification. Wits Business School in Parktown, Johannesburg is the venue for the next four-day BHF Trustee programme, which is staggered over two blocks: 19-20 October and 2-3 November. One of the important areas that the course covers is the role and responsibilities of trustees – this is particularly relevant for training newly elected trustees and to upskill existing trustees and company management. In addition to the roles and responsibilities, the course also covers the real business of a medical scheme, vital knowledge on health and corporate governance, and the law in relation to medical schemes.

Zola Mtshiya, Marketing and Communications Manager, BHF

Unregulated fees make for an unhealthy private healthcare environment

econdary healthcare expenditure is eating away at the medical scheme benefits of South Africans, largely because healthcare specialists are able to invoice patients and medical schemes in an unregulated fee-for-service environment, in which every service performed has a code and a price tag. This is the view of Patrick Masobe, Chief Executive Officer of medical scheme administrator and clinical risk manager, Agility Health. “Among the biggest cost drivers in the healthcare funding sector are knock-on costs resulting from the way that the practice of medicine has evolved through the years, given costly new technologies and developments, which have rendered the cost of healthcare service provision prohibitively high. The more services the healthcare professional performs, the higher the bill will ultimately be,” he says. Litigious environment “Add to this over-servicing due to clinicians practicing highly defensive medicine, which is often in response to the highly litigious environment healthcare professionals find themselves in. Doctors argue that they

must test for all possible conditions in order to protect themselves from legal liability in the event that they could possibly have missed something. Unfortunately, this tends to drive overly cautious behaviour, which in turn increases healthcare expenditure.” According to Dr Jacques Snyman, Director of Product Development at Agility Health, this means that doctors in an emergency setting may perform a range of tests to guard against the possibility that they could miss something of medical significance. “However, quite a number of the tests performed may, in fact, be quite unnecessary,” he adds. Dr Snyman cites a recent example of a patient who presented with chest pain and breathing difficulties. She lodged a complaint after receiving a R4 000 pathology account from a Pretoria emergency room. “As a known cardiac patient, she was rushed off to the emergency room for fear of a heart attack, and received a physical examination, electrocardiogram [ECG] – which is a test measuring the electrical activity of the heart – as well as blood tests checking heart enzymes. Given her history these tests were all necessary and were appropriately performed.”

Unnecessary tests In addition, however, a thyroid function, cholesterol, full liver, renal function as well as electrolyte tests were also performed. “All of these were unnecessary within this context, thereby constituting over-servicing as they were done in the immediate past during normal follow-up.” says Dr Snyman. “A host of other markers was also requested, again with no real relevance to this case. The patient was eventually diagnosed with inflammatory costochondritis, which is an inflammation of the cartilage in the rib cage. This condition can present as mild to severe chest pain, which in this case responded well to pain medication.” “It is of particular concern that the patient was never asked to consent to the tests performed or informed of the costs thereof,” Dr Snyman adds. “This constitutes a serious breach of the ethical codes and rules of the Health Professions Council of South Africa [HPCSA], which require that the doctor or healthcare facility to obtain informed consent from a patient prior to performing tests and that they explain billing practices upfront.”

Masobe explains that in terms of prescribed minimum benefit (PMB) regulations, all relevant tests that are done to exclude acute PMB conditions, such as a myocardial infarction, must be fully covered by a medical scheme. “It is important to note, however, that the scheme is only liable to fund this as a PMB condition until such time as a PMB condition has been excluded. In this case, it meant that the clinical examination, ECG and heart enzyme tests were funded as a PMB but not the additional, extraneous and medically unnecessary tests. This becomes a dilemma for the patient, who now becomes liable for paying these fairly expensive additional costs from medical savings or, worse still, costs need to paid from the patient’s own pocket.”

Patrick Masobe, CEO, Agility Health

Change is in the air

If there’s one thing that’s guaranteed in life, it’s change. At Bestmed we recognise that medical aid needs change over time, which is why we offer 13 personally tailored plans to suit every stage of your life. Our administration costs are between 3 - 5 % cheaper because we are self-administered. This means that our members save more by paying less towards contributions. We have had the lowest increases year after year, and we charge less for each additional child. We don’t believe in self-payment gaps, and our plan options have 75% less co-payments. In changing times, you can recommend Bestmed with confidence. For more information, visit www.bestmed.co.za

SECTION 29 OSFF 711797

31 October 2017

BOOKS ETCETERA

31 October 2017

EDITOR’S BOOKSHELF

SUDOKU ENTER NUMBERS INTO THE BLANK SPACES SO THAT EACH ROW, COLUMN AND 3X3 BOX CONTAIN THE NUMBERS 1 TO 9. A SHORT HISTORY OF SOUTH AFRICA BY GAIL NATTRASS In A Short History of South Africa, Gail Nattrass, historian and educator, presents the reader with a brief, general account of South Africa’s history, from the very beginning to the present day, from the first evidence of hominid existence, early settlement pre- and post-European arrival and the warfare through the 18th and 19th centuries that lead to the eventual establishment of modern South Africa. This readable and thorough account, illustrated with maps and photographs, is a culmination of a lifetime of researching and teaching the broad spectrum of South African history, collecting stories, taking students on tours around the country, and working with distinguished historians. Nattrass’s passion for her subject shines through, whether she is elucidating the reader on early humans in the Cradle of Humankind, or the tumultuous twentieth-century processes that shaped the democracy that is South Africa today. A must for all those interested in South Africa, within the country and abroad.

FIFTY THINGS THAT MADE THE MODERN ECONOMY BY TIM HARFORD The world economy defies comprehension. A continuously changing system of immense complexity, it offers over ten billion distinct products and services, doubles in size every 15 years and links almost every one of the planet’s seven billion people. It delivers astonishing luxury to hundreds of millions. It also leaves hundreds of millions behind, puts tremendous strains on the ecosystem and has an alarming habit of stalling. Nobody is in charge of it. Indeed, no individual understands more than a fraction of what’s going on. How can we make sense of this bewildering system on which our lives depend? From the tally stick to the barcode, concrete to cuneiform, each invention in Tim Harford’s fascinating new book has its own curious, surprising and memorable story, a vignette against a brand backdrop. Step by step, readers will start to understand where we are, how we got here and where we might be going next.

SA National Rowing Squad

RMB announced as name sponsor of SA National Squad for rowing

MB has announced a threeyear sponsorship of rowing, becoming the named sponsor of the RMB National Squad. The sponsorship comes after a two-year association between the bank and the sport. The sponsorship consists of a significant cash amount which is administered by the Team Powerhouse Trust. The trust works with Rowing South Africa for further development and inclusivity of rowing and to enable athletes to compete and prepare internationally for Tokyo 2020 and beyond. With recent medal wins in Lithuania by RMB National Squad members Megan Hancock and Thabelo Masutha, both the diversity and medal potential of the squad was confirmed. In addition to the cash injection,

RMB is working with various rowing schools to support grassroots initiatives. As part of the sponsorship, RMB also becomes the named sponsor of four regattas across the country. Says James Formby, CEO of RMB: “South African rowing endorses RMB’s 30-year strong business philosophy of ‘Traditional Values, Innovative Ideas’ by being steeped in tradition and yet relentlessly innovative. Rowing was one of the founding sports of the modern Olympic movement and South African rowers have steadily grown their medal contributions over the years. With minimal financial support the squad has had to be innovative in finding, training and supporting athletes. RMB is proud to support the team as they work to make our nation proud.”

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