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BLUECHIPINVESTMENT | ETFsClient confidence beyond the wrapper:engaging investors on investment safetyFinancial planners need to demystify an increasingly complex array of products in today’sinvestment landscape.From unit trusts and ETFs to structured products, clients seekguidance on safety. The challenge lies in helping clients lookbeyond labels towards the underlying risk, regulation andappropriateness of each investment. The evolution of theSouth African retail investor has been shaped by regulatory progress,technology and product innovation. From an era when investmentopportunities were primarily reserved for institutions and high-networthindividuals, retail investors now enjoy direct access to a widearray of investment vehicles.Investments are typically made through Linked InvestmentService Providers (LISPs), stockbrokers or bank platforms. Unit trustsoffer diversification, accessibility and a mature regulatory regime.The prevailing approach to portfolio construction often defaults toa collection of unit trusts rather than a blend of distinct strategiesacross different wrappers. But investing isn’t limited to one format.Nor should it be.Safety in investing is an outcome of sound regulation, transparentdesign and investor understanding. It’s essential to appreciate thatno investment is risk-free. What matters is whether the risks areappropriate for your goals and are managed effectively.Unit trusts, ETFs, structured products: what’s the difference?ProductTypeIssuer Primary Regulator(s) Investor ProtectionsUnit Trusts Asset managers Collective InvestmentSchemes Control Act(CISCA), FAISETFsStructuredProductsHedgeFundsAssetmanagers/issuersBanksAsset managersJSE listingsrequirements, CISCABanks Act, FAIS, BaselIV, prudentialstandardsCISCA (as per retailhedge fund rules)Table 1. Investment products and their regulation.Daily pricing,diversification rules,trustee oversightIndex tracking, liquidity(if exchange listed)Capital or yieldprotections (whereapplicable), definedoutcomesDisclosure standards,leverage limitsAll these products are regulated under South Africanlaw, but regulation reduces risk, it does not eliminate it.Structured productsStructured products are often misunderstood. Theyoffer predefined outcomes based on marketscenarios – for investors seeking certainty.Yet, concerns have been raised about theirsafety. When structured products fail tomeet expectations, it’s typically due to:Misunderstanding the product• Mismatches between investor needs and product design.• Mis-selling by advisors or platforms.Structured products issued by reputable institutions and used correctlyperform as expected but require due diligence. Investors mustevaluate both the product features and the issuer’s creditworthiness,especially as many products are issued by banks whose obligationsare unsecured.Understanding regulationIn South Africa, investments benefit from multi-layered regulations:• Statutory laws like CISCA, the Banks Act and the Financial Advisoryand Intermediary Services (FAIS) Act.• Prudential frameworks like Basel IV.• Conduct regulations enforced by the FSCA.• Dispute resolution mechanisms.Beyond formal laws, there are industry codes of conduct, reportingobligations, compliance guidelines and enforcement frameworks,which create a robust safety net.Investment risksAll investments carry risks that are not unique to any single producttype and should be carefully evaluated regardless of the investmentwrapper. Key risks include:• Credit. The possibility that the issuer defaults.• Market. Losing money due to movements in financial markets.• Liquidity and marketability. The inability to access/sell yourinvestment without affecting its price.• Operational and behavioural. Issues like administrative failure orinvestor panic during volatility.Clients are increasingly exposed to traditional and alternativeinvestment opportunities, so safety is no longer a one-dimensionalconcept. It’s shaped by product structure, regulatory strength andinvestor awareness.As financial planners, your role is to engage constructivelywith complex products. For instance, you can translateregulatory frameworks into practical guidance, explaintrade-offs across wrappers and align recommendationswith client goals. This elevates advice beyond transactionto relationship. When guiding a client on productsafety, the message remains the same: informedVuyo Nogantshi, Headof Distribution: Indexand StructuredSolutions, Absa Groupinvesting begins with understanding.Understanding begins with engagement. Yourability to engage clients on the safety of theirinvestments is what will ultimately build trustand enhance their investment experience. 34 www.bluechipdigital.co.za
INVESTMENT | SolutionsLeading the way to pan-AfricanismAbsa Index and Structured Solutions sits within Global Markets in the Corporate and Investment Banking divisionof Absa and is fundamental in the group’s objective of being a leading pan-African bank. Blue Chip caught upwith Fundi Pikashe, CFP®, Head of Distribution: Structured Solutions, Corporate and Investment Banking, Absa.BLUECHIPPlease provide an overview of the team’s mission and how itfits within Absa’s broader Corporate and Investment Banking(CIB) strategy.Absa Index and Structured Solutions (AISS) offers clients solutionswhich fit into three capabilities:• Index Solutions. Exchange traded products (ETFs, ETPs and AMCs)offering low-cost, seamless and efficient trading.• Structured Solutions. Pre-packaged solutions that allow retailinvestors to achieve customised risk-return objectives and enhancetheir investment opportunities by offering tailored exposure tovarious asset classes and market conditions.• Fund Solutions. A range of investment strategies that optimallymanage risk and return objectives on a single fund or portfolioof funds.What inspired the decision to take traditional investmentbanking products into the retail market? What opportunitiesdo you see in this space?By innovating to allow scalable access to retail investors, we createopportunities for our clients to expand their investment universe,achieving better outcomes from both a risk and return perspective.There is currently a very low penetration of these products in retailclient investment strategies. An opportunity exists for retail advisorsto build better solutions for their clients by taking advantage of toolsets that complement how they have historically worked for clients.How does Absa CIB support the integration of traditional investmentbanking products into the retail market?Part of CIB’s strategy is to be purposeful in how we compete; byidentifying attractive growth pockets by geography, segment andproduct. We identified the retail market as a segment that benefitsfrom the solutions historically offered to institutional investors.We offer lower minimum investment amounts to retail investorsin our Structured Products range monthly, making these products farmore accessible. The same is true for our fund-linked solutions whereadvisors provide customised solutions on a client-by-client basis.How does Absa CIB’s global reach and expertise enhance innovationand meet the needs of retail clients?Absa Group is a diversified financial services provider headquarteredin Johannesburg with over 41 000 banking professionals and acustomer base of over 12-million. Our presence in Africa includesregionally coordinated coverage in 12 markets. We provide globalreach through our London and New York offices. The firm leveragesits strength in capabilities across the global markets and investmentbanking disciplines together with internal and external partnershipsthat ensure retail clients have access to current and relevant solutions.What role do global markets play in the delivery of retailbanking products?As a part of the broader CIB, the Global Markets division delivers on thestrategy to be a leading pan-African bank. The depth of capabilitieswithin Global Markets, the partnerships leveraged both on andoutside the continent, our drive to be a digitally powered businessand a robust control environment ensure the successful developmentand delivery of a valuable range of solutions.How does AISS provide added value to retail clients, and whatdifferentiates it from other players in the market?AISS distinguishes itself by offering:• Customisation and flexibility. Clients can test different approachesacross a diverse solutions range.• Comprehensive documentation. Transparency and jargon-freeexplanations allow a more certain investing experience.• Advanced trading platforms. Providing relevant data on theperformance of investors’ strategies.• Dedicated support. A diverse response team that covers all aspectsof investing journeys.• Ethical practices. Prioritising investors’ best interests and avoidingconflicts of interest.Please outline upcoming initiatives or products.While our structured products have a well-established track recordof delivery, we continuously innovate in this space with product ortransactional improvements. Our fund solutions are new to market, andwill revolutionise how advisors and investors structure their portfolios.How does this initiative align with Absa’s overall client commitment?Absa Group aims to be a leading pan-Africanbank, grounded in its responsibility to serveits clients. This dedication involves a deepunderstanding of the value providedthroughout the entire client relationship.AISS extends the availability of traditionalbanking products, once exclusiveto institutional clients and hedge funds,to retail clients. Consequently, ourservices allow retail clientsto tailor solutions to theirneeds, granting them theflexibility in defining theirown investment goals. Fundi Pikashe, CFP®, Headof Distribution: StructuredSolutions, Corporate andInvestment Banking, Absawww.bluechipdigital.co.za
