Blue Chip Issue 83

BLUE CHIP FPI Stronger

BLUE CHIP FPI Stronger than ever 2021 data show the CFP® mark is stronger than it’s ever been Despite the challenges posed by the global pandemic, the worldwide number of CERTIFIED FINANCIAL PLANNERS® topped 200 000 for the first time. Under the stewardship of FPI, the South African profession is also going from strength to strength. Worldwide data show a net increase of 10 550 CFP® professionals last year. More than 203 000 highly skilled individuals on all six continents are now able to put the three most important letters in financial planning behind their names. The 5.5% global net increase in CFP® professional numbers highlights the fact that the financial planning profession is becoming more important by the day. “We’re pleased to report that, despite the Covid-19 pandemic, momentum in the global growth of CFP® professionals remains strong and is increasing,” says Noel Maye, the CEO of the US-based Financial Planning Standards Board (FPSB). “Last year, the number of CFP® professionals reached the highest ever, with growth from emerging, developing and mature markets demonstrating the broad appeal of financial planning and CFP® certification worldwide.” The future is bright in South Africa Against a backdrop of one of the world’s strictest lockdowns, FPI Southern Africa achieved an impressive 2.7% growth in CFP® professional numbers last year. In addition to being the Southern Africa custodian of the CFP® mark – the international standard of financial planning – the FPI is enabling the development and professionalisation of the professional financial advice industry with its REGISTERED FINANCIAL PRACTITIONER and FINANCIAL SERVICES ADVISOR SAQA registered designations. All this moves FPI closer to living their ambitious vision of “professional financial advice and planning for all.” One of FPI’s main focuses for 2022 is to demonstrate the immense value of the CFP® designations to all new entrants into the market. “We’ll also look at fine-tuning our corporate relevance,” adds CEO Lelané Bezuidenhout. “And we’ll work on deeper education around the designations and its great benefits to professional financial advisors, financial planners and their clients.” Onwards and upwards Globally, the number of CFP® professionals has doubled since 2004 – yet more proof that consumers are realising the immense benefits of professional financial planning and advice. In recent years much of the growth has been concentrated in China and in developing economies such as South Africa, Brazil, Indonesia and India. Maye credited this growth to the tireless efforts of the global network certification bodies such as FPI and to the “hundreds of thousands of CFP® professionals worldwide who commit to rigorous standards of competency, ethics and practice and to delivering financial planning in their clients’ interests”. For Bezuidenhout, growing the CFP® designation is about more than just doing her job, it is a matter of patriotic duty. “The economic challenges wrought by the Covid pandemic, the ongoing spectre of corruption and rapidly rising interest rates don’t make for a pretty economic picture for South African consumers,” she explained. “I am convinced that the financial planning profession in general and the CFP® mark in particular have a massive role to play in fostering financial wellbeing for this and future generations. And my colleagues and I will be doing everything in our power to make this happen.” 72 www.bluechipdigital.co.za

Why the multi-management model works Even at the best of times, markets can be unpredictable. Kagiso Matole, Portfolio Manager, Novare Sudden shifts and impact events aside, the entire market cycle passes through different phases that make it virtually impossible for any single fund to unfailingly outperform in any class or sector. No matter the individual manager style. Therefore, a multi-manager or a fund of funds approach continues to be one of the most consistently successful ways to adjust risk and deliver better return on investment. Purpose These are funds that specifically invest in other funds rather than individual stocks and bonds. This essentially allows each fund to assemble a team of highly specialised experts to develop a portfolio of investments across the spectrum of funds in the marketplace. The multi-manager model works by combining multiple performing funds into a single, secure offering. A wellstructured, well-resourced and well-researched investment philosophy applied to a portfolio of funds does more than look good on paper, it delivers consistently over time in real-world application. The benefit of diversification Multi-management funds enable any investor to obtain instant diversification across multiple variables: market sectors, asset classes, geographies and even management styles. This minimises the dependency on any given variable to deliver returns, mitigating risk by compounding the overall performance of the combined portfolio. Investors can look forward to protection from severe downturns while maintaining a stable rate of return. It is particularly attractive to the investor who has just enough to invest but falls short of being able to develop a fully diversified portfolio across individual funds directly. The benefit of specialisation Multi-management funds pool the expertise of multiple investment experts, with each fund manager devoted specifically to their unique area of expertise while maintaining awareness of their individual contribution to the overall fund structure. It’s also worth noting that the individual funds themselves, being specialists, have already conducted their own rigorous processes in researching, selecting and assembling their own assets and management style. All of which they actively continue to optimise independently of the multi-management fund. The result is multiple layers of active management, endlessly engaged in producing better returns. The benefit of active management Multi-management funds reduce the onus on the investor of having to find, research and invest in individual funds. It’s more than just that, though, it’s common sense. There is quite simply, no way any single investor can ever stack up to the total of expertise and real-world know-how of an entire team. Nor can they ever respond as quickly or effectively to sudden market shifts or events as dedicated specialists can. Overall, it just places less demand, less stress on the investor, whether they are new to hedge funds or seasoned veterans. It’s an effortless way to achieve that crucial balance of appropriate risk and return. Cost implications Multi-management fund fees, on average, are nominally higher than those of single manager funds due to the multiple layers of cost attached to multiple layers of management. However, the decision to invest in a multi-management fund is a value-for-money proposition. Sure, it may cost a little more, but there is a lot more to be gained in terms of peace-of-mind and predictable returns over the long term. One should also consider that multi-manager funds have substantial buying power, which allows them to negotiate on fees and access institutional share classes. This saving is also passed onto the end client, making the cost of ownership much less demanding. Summary Choosing a multi-management portfolio comes down to personal appetite for risk. While the function of funds of funds is to reduce risk, there remains varying levels of risk attached to various portfolios, depending on how they are constituted and managed. What you should look for is the right mix of these four key benefits that best suits you: • Consistent Returns. How well has the fund performed? How predictable is that return? Can the return be associated with a clear philosophy and process? • Risk vs Return. What diversification and active portfolio management is in place? How has the fund responded to both adverse systemic and nonsystemic events? • Access to Opportunities. What products does the fund invest in which would otherwise be unavailable to you? • Fee Structure. Does the fund, for example, utilise lower-fee institutional share classes to reduce your costs? At Novare, we offer multi-managed investment solutions in the form of South African funds of hedge funds, unit trust funds, an offshore fund of funds, and bespoke solutions. Depending on your unique needs, objectives and risk appetite, trust us to help you select the right fund for you. For more information, go to www.novare.com.