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BLUECHIPFINANCIAL PLANNING | InvestmentUnlocking success: the powerof process in sports and investingYou’re only as good as your process. You’re not as good as your outcome.the process”.That’s what Handré Pollard said when he wasinterviewed after kicking the match winning“Trustpenalty to beat England in the Rugby World Cupsemi-final in 2023. He slotted the kick in the 78th minute toput the Springboks into the lead for the first time in the game.The pressure was huge. The Springboks were expected towin by some margin, but the first half was a disaster, and theSpringboks had to fight their way back into the game.Long-term adherence to one’sprocess is vastly underrated.Pollard didn’t just slot the kick. He absolutely middled it.The Springboks went on to win the game by one point and beatthe All Blacks by one point to win the World Cup final.Handré Pollard did not miss a kick at the poles for the entireWorld Cup. His record was 13 from 13. This is exceptional –especially when you consider that most of these kicks wereduring the quarter-final, semi-final and final.It’s clear from his track record that he thrives in high-pressuresituations. Pollard has played in 32 knock-out rugby games inhis career, of which he has been on the winning side on 28occasions (while playing for eight different teams). That is an88% winning record in knock-out games.I would argue that Pollard’s focus on process, rather thanon outcome, is one of the main reasons why he and his teamthrive under pressure. All his process-driven training Mondayto Friday, which includes a rigorous training regimen, precisekicking mechanics and mental preparation, enable him to havea high probability of successful outcomes on Saturday.Jimmy Spithill, a professional sailor and skipper, saidthe following about process and outcome:“You are only as good as your process. And if yourprocess is solid, then you will be consistent. And if youare consistent, then you will be good. But if your process isflawed, then you will be inconsistent, and you will be bad. So,you’ve got to focus on the process, not the outcome. Because ifyou focus on the outcome, you’ll never get there. You will neverget there because you will never have a solid process.”When the going gets tough and you are in a high-pressureenvironment, you will fall to the level of your process. In theworld of sport, a well-defined and repeatable process playsa significant role in success. But the importance of processextends far beyond the playing field. In the world of investing,a well-defined and repeatable process is equally crucial forachieving superior outcomes.Investing is a complex and unpredictable game, whereemotions and biases can often cloud judgement. However,by establishing a clear and consistent process, investors cannavigate the markets with greater confidence and clarity. If youhave a good process, you should have good long-term results.In the short run there is no correlation between process andoutcome, but over the long term, that’s what really matters.Investment process is extremely important.Short-term investment outperformanceis overrated. Long-term adherence to one’sprocess is vastly underrated.A well-defined and repeatable processis one of the keys to success for achievingsuperior outcomes in both sports andinvesting. Whether on the rugby field,sailing in the ocean or investing in themarkets, the power of process is undeniable– and those who embrace it are likely to berewarded with superior results. Andrew Padoa, Portfolio Manager, Sasfin Wealth54 www.bluechipdigital.co.za

Looking forward to a RAG-based futureWhy AI is going to be part of the future of financial advice.INVESTMENT | TechnologyBLUECHIPLarge Language Models (LLMs) and their more recent cousin– Retrieval Augmented Generation (RAG) – have been takingthe world by storm. This storm is not going to leave the worldof financial advice unscathed. In fact, we believe that it isgoing to fundamentally change the way advice is given.Most people have already encountered LLMs in some way.They are prompt-based generative models – they generate textand images in response to prompts by a user. They are incrediblypowerful in this area and give users the ability to generate contentvery easily. They are not perfect, however, as they make thingsup if there is a need to do so. As they have been developed tobe deployed in as general a context as possible, they are not thatuseful in specific contexts such as reporting or financial advicewhere accuracy is vital.A new approach overcomes these problems:RAG opens the door for the use of LLMs in bothfinancial reporting and advice. In fact, we believethat the opportunities this approach offers are tooincredible to ignore.RAGs differ from traditional LLMs in thatthey combine the generative power of these generalist modelswith access to a store of specialised, local and time-specificknowledge such as your client’s current portfolio, commentaryfrom the managers they are invested in and news about globalinvestment markets.If properly constructed, they offer advisors the potential toaccurately generate reports reflecting this information in anautomated way. Imagine the value-add to your clients of havinga unique performance report that reflects their returns andcommentary pertaining to their portfolio only. Imagine the timesavings made of being able to generate these reports automatically,and even on demand.While these are amazing developments, they just reflect thepotential for doing what we do now – just better (much, muchbetter!). But wait, there’s more! RAG offers other benefits for anadvice process that are simply not possible now. We believe thatthey can improve the advice process by allowing advisors to dothings differently. More specifically, they incorporate personalitybasedinformation about the client and use this information tosuggest interventions and generate communications in a waythat resonates with them better and leads to better investmentoutcomes for them.My colleague, Paul Nixon, and I have been investigating ourclients’ (mainly) self-defeating investment switching behaviourfor many years. More recently, we used machine learning-basedtools to do so. We have published several academic papers onthis topic because the use of machine learning to understandclients is seen to be novel and helpful.This technologywill be part ofyour future.In this work, we have identified clusters of investor behaviourthat significantly vary from each other. This can be useful to advisorsto segment their client books into groups that require differentinteractions as their reasons for switching their investments aredifferent. Crudely speaking, some may be performance-seeking,while others may be switching funds to avoid risk. We have alsodeveloped a successful predictive model of these switches – again,using machine learning models. We are currently exploring the roleof psychological variables in terms of explaining this behaviour.Intuitively, they should help, but it is very important to demonstratethat you can measure these reliably and that there is good empiricalevidence that shows they matter.These findings provide significant insights into the nature ofyour clients and their behaviour – but what wehave found is that advisors struggle to interpretthese insights and choose the correct interactionsto use them. This is where RAG offers somethingcompletely new. It tells you which clients are likelyto switch and why – and it offers you advice onhow to leverage this information. It helps generatecommunications that are tailored to the client’s psychologicalmakeup and addresses the underlying reasons for the switch. That’ssomething that good advisors may do instinctively – but not alladvisors can do so.RAG offers the potential for more efficient reporting and betterqualityadvice. Finally, by providing the ability to store clientinformation in a more explicit form, it provides a way to increasethe value of your book when you retire. While there are technicalissues to overcome, this technology will be part of your future. It willbe very exciting to see this happen and be part of it. Paul Nixon, Head ofBehavioural Finance,Momentum InvestmentsProf Evan Gilbert, Research Strategist,Momentum Investments and ResearchProfessor, Stellenbosch Universitywww.bluechipdigital.co.za55