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W E A LT H

S U M M IT Building Wealth through Investment P R E S E N T A T I O N B Y

DaniĂŤl Kriel

CEO, Sanlam Private Investments


is proudly supported by: !

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www.sa-la.org membership@sa-la.org +27 (0) 791787867


“The Red Sun” Stefan Ampenberger (1908 - 1983) Sanlam Art Collection

building wealth through investment March 2012


quick facts   change

is the reality

  the

cost of living in South Africa is increasing

  the

tax burden on individuals is increasing

  SA

personal savings rate as % of disposable income - 0%

  70%

of retirement fund members who left their jobs in 2010 cashed in their savings

  <10%   a

of South Africans could retire without financial assistance

loaf of bread is expected to cost around R52 in 30yrs’ time a doctor’s visit should cost around R2,500


financial issues of high concern Source: Affluent Insights Quarterly Survey, Merrill Lynch

  rising

health care costs or expenses (75%)

  the

impact of the economy on my ability to meet financial goals (58%)

  preserving

an inheritance for my children and/or grandchildren (54%)

  the

current state of my retirement plan (50%)


the good news ... Credit Suisse: Global Wealth Report 2011

  Global

wealth has increased to $230 trillion from $195 trillion in 2010, led by growing wealth in South Africa, India, Australia, Chile and Singapore.

  The

number of dollar millionaires in South Africa will increase by 242% to 243,000 by 2016

… exponential growth


the good news ... projected annual personal income growth R1m - R2m

R2m - R5m

R5m+

2010

75 589

22 230

4 720

2011

89 201

26 233

5 570

2012

111 997

32 937

6 994

2013

146 133

42 976

9 126

Source: BMR 2010, SARS 2008


but, whatever the categorisation,

the credit crunch has had a major impact

made for Tribune in the UK â&#x20AC;&#x201C; hackcartoons.com


the rules of investment 1: never lose money 2: never forget the first rule


critical factors 1.  choice of wealth manager 2.  choice of asset mix 3.  traps to avoid 4.  good habits


1 choice of wealth manager


remember him?


and these institutions?


what do the wealthy want? Source: Affluent Insights Quarterly Survey, Merrill Lynch

Top 6 Priorities of HNW Clients


what do the wealthy want? Branding and Segmentation in Wealth Management

the needs of wealth management clients are hugely diverse depending on demographics, how their wealth was created, geography, attitude to risk… but there are broad   {excellent}

common themes:

service

  trust   personal

relationships …


what do the wealthy want? Affluent Insights Quarterly, Merrill Lynch 2011

the importance of relationship is stems from the correlation between ‘satisfaction with your financial advisor’ and following attributes:   responsive  

to requests

someone to trust

  understand   being

needs and personal values

proactive

  offering

personalised advice re. specific needs & challenges

84% 81% 84% 77% 78%


what do the wealthy want? Branding and Segmentation in Wealth Management

a relationship extends beyond the wealth manager or the brand itself, many clients make choices based on affinity & affirmation “a feel of exclusivity” “a club that not anyone can join” “knowing that someone cares” “connectivity with the organisation” “advice one can trust”


why clients chose wealth managers Source: Weatherill Executive Consulting QUALITY OF SERVICE 82% 93% TIMELY AND APPROPRIATE CONTACT

78% 83% PORTFOLIO PERFORMANCE 74% 69% STRENGTH OF RELATIONSHIP WITH RM

72% 87%

CLIENTS

WEALTH MANAGERS

REGULATORY COMPLIANCE

69% 53% OVERALL STRENGTH OF ORGANISATION

66% 65% INDEPENDENCE OF WEALTH MANAGER

62% 54% EXTERNAL FINANCIAL FACTORS (E.G., PROFITABILITY) 44% 19% QUALITY OF ONLINE SERVICES

46% 27% STRONG BRAND

40% 51% ACCESS TO CONCIERGE/CARD SERVICES

22% n/a

significant differences remain between what clients and wealth managers consider important


what do the wealthy want? PwC Global Private Banking and Wealth Management Survey 2011

client service replaces investment performance as the critical quality historically, performance was king, and primary reason cited for leaving an organisation in the aftermath of the financial crises, client loss now results from poor customer service and overall lapse in client relationship management


question: what is the single most important thing that your wealth manager does well that helps them to be your â&#x20AC;&#x153;trusted advisorâ&#x20AC;??


some tips in making your choice   get

references from clients

  registration   quality   check

/ regulatory issues

and experience of staff

the staff turnover

  remuneration   …

/ incentivisation model

do your homework

  remember:

past performance is no guarantee for future performance


2 choice of asset mix


importance of asset allocation

Balanced: Proxy for a diversif ied portfolio : 60% J203T | 10% ALBI | 10% STeFI | 12.5% MSCI World Equity | 7.5% JP Morgan Global Bond SA Real Estate: J255T Source: Sanlam Investment Management


SA returns & risk of asset classes since 1900


Volatility less important over the long term


SA asset class performance since 1900


SA 20 year asset class returns


10 year returns â&#x20AC;&#x201C; selected markets vs SA


69

%

of affluent non-retirees cited: having a

diversified portfolio

gives confidence in ability to meet long-term goals Affluent Insights Quarterly, Merrill Lynch 2011


some tips   inflation   asset

is the real enemy of building wealth

allocation determined by:      

  continuously   portfolio

investment goals investment horizon risk appetite

revisit – change when necessary

should be well diversified between geographic and asset classes


3 traps to avoid   not

following integrated / coordinated approach – have products with different providers, don’t keep track etc.

  ignorance

of the available investment vehicles

  emotions:  

panic / overreaction to chance events

   

over confidence bias anchoring

 

complacency


investors ‘rational’ “buy”

“sell”

Greed: Conviction of new era Indifference Enthusiasm Confidence

Dismissal Denial

Confiden

Concern Fear Panic Despair Capitulation & Contempt

Caution Doubt & Suspicion


5 good habits   re-invest   avoid

short-termism / apply patience

  don’t

jump around

  ensure   be

the right structure / wrapper

meticulous and take ownership


the importance of compounding dividends R1.00 invested in 1960 1400

1325

1200 1000 800 600 378

400 200

0 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 All Share

All Share - dividends reinvested


compound vs simple return R1000 over 30 years at 10% return


value of $10 000 invested S&P500

Berkshire Hathaway

1971

$10 000

$10 000

1974

$7 456

$5 708

1975

$10 229

$ 5422

1976

$12 643

$13 392

1991

$92 940

$1 361 805

2008

$259 068

$14 387 737

Source: Berkshire Hathaway / Sanlam Investment Management  


in closing

Victory awaits him who has everything in order â&#x20AC;&#x201C; luck, people call it. Defeat is certain for him who has neglected to take the necessary precautions in time; this is called back luck. - from The South Pole, by Roald Amundsen


thank you!


“The Red Sun” Stefan Ampenberger (1908 - 1983) Sanlam Art Collection


SALA Wealth Summit 2012 - Daniel Kriel