11 months ago

Blue Chip Issue 86

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Blue Chip Journal is a quarterly journal for the financial planning industry and is the official publication of the Financial Planning Institute of Southern Africa NPC (FPI), effective from the January 2020 edition. Blue Chip publishes contributions from FPI and other leading industry figures, covering all aspects of the financial planning industry. Visit Blue Chip Digital:


BLUE CHIP COLUMN Beware the Twit Giving voice to the people: your new reality. Rob Macdonald, Head of Strategic Advisory Services, Fundhouse Rob Macdonald has held several senior positions in the investment industry. At Fundhouse, he acts as a consultant and coach to financial advisors and develops and facilitates training programmes in behavioural coaching and practice management. Before joining the financial services industry, Macdonald was MBA director at the UCT Graduate School of Business. He is co-author of the book Rethinking Leadership and has consulted, written and spoken widely on a range of topics. Macdonald has a Master’s degree in Management Studies from Oxford University and is a CFP® Professional. Early in his tenure at Twitter, self-titled Chief Twit Elon Musk tweeted, “I’m not saying we should downplay journalists. I’m simply saying we should give voice/ elevate the people. Vox populi.” Whatever Musk does either to build or destroy Twitter, voice has already been given to the people. Journalists are no longer the guardians of our news flow. Cape Talk, the first talk show radio station in Cape Town, recently celebrated its 25th birthday. John Maytham hosted the station’s first show 25 years ago and now hosts the Afternoon Drive show. Reflecting on the past 25 years, Maytham shared his perspective as a journalist in a pre-cellphone, pre-social media world where he would observe the story he was tasked to report on, write it up and then find a way to phone that story into the radio station, either using a public payphone or knocking on the door of a local household and asking to use their phone. When phoning the story in, Maytham explained that it was communicated unfiltered through his eyes. Journalists had autonomy over what to observe, how to interpret whatever they saw, and then of course total freedom in how they wrote and reported on the story. In today’s world of social media and mobile phones, the journalist is no longer the sole arbiter of news information. Anyone anywhere can share news on their platform of choice, whether that news is true or not. The implication of this is that journalists must reinvent themselves to remain relevant. They cannot simply be a source of information but must play the role of analysts, helping us make sense of the news that is out there. Their role as watchdogs for society is being taken to a new level through investigative journalism which, as we have seen in South Africa, is key to uncovering the ills of society across all sectors. Journalists are also having to redefine their economic model. With the surplus of information in the metaverse, the public is more discerning about what they will pay for. And as Musk is discovering with the exodus of advertisers from Twitter, advertisers have multiple channels to access “the people”. The parallel between the worlds of financial planning and journalism is striking. Only 25 years ago, financial planners were the guardians of all financial information. Today, my 92-year-old mother laments the fact that if radio journalist Bruce Whitfield was hosting The Money Show when she was earning money, she and my father would have been so much better informed about their financial decisions. As my mother is now blind, listening to the radio is her main window on the world. My guess is she would be complaining even more about not being informed if she could access the swathe of real-time digital information, available from literally hundreds of thousands of sources, at the click of a button. It’s not ideal for long-term investors to be accessing their investment values daily. Recently I asked several groups of financial planners about the biggest challenges they face. Controlling the frequency of clients’ access to information came up repeatedly as a concern. This is understandable. For example, it’s not ideal for long-term investors to be accessing their investment values daily, a recipe for self-sabotaging investor behaviour. But in the same way that journalists can no longer control access to information, nor can financial planners. Journalists have had to redefine their value offer and their economic models; financial planners are now being challenged to do the same. It is imperative that financial planners take up this challenge to ensure that clients don’t fall foul of the suggestion, that at least one Twit is likely to make, that in this digital age people have the power to do it for themselves. 16

COLUMN BLUE CHIP It’s a Cruel, Crazy, Beautiful World And it was a cruel, crazy 2022. Florbela Yates, Head of Equilibrium Florbela Yates is the head of Equilibrium in the Momentum Metropolitan group. Equilibrium is an independent discretionary fund manager that partners with financial advisors to help them enable their advice outcomes. Equilibrium brings balance to an advice practice by delivering services and investment solutions to help clients achieve their defined investment goals. Johnny Clegg was one of my favourite South African artists, and as I sat down to write this month’s column, his song “Cruel, Crazy, Beautiful World” came to mind. The song depicts how I felt about investment markets in 2022. I started the year faced with hope for what lay ahead, Covid was behind us and the future seemed bright. South African equities and bonds were well priced and there seemed to be some renewed optimism from both investors and asset managers alike. On 25 February 2022, it all changed when Russia invaded Ukraine. More broadly, we started to see signs of rising global inflation and the potential for a recession in the US. Suddenly our beautiful world morphed into a crazy one, filled with increased volatility, lost hope and pessimism. Locally, this was exacerbated by Eskom’s issues and another period of rand weakness. Uncertainty nearly always results in investors unable to make any new investment decisions. For some, it could even lead to disinvesting or de-risking by moving to perceived risk-free assets. This time was no different. As volatility increased, South African investor flows moved out of balanced funds into fixed income and money market solutions. This trend continued for most of 2022. We also saw a decrease in the demand for offshore investments. History has taught us that investors wishing to meet their investment objectives should be more concerned about “time in the market” than “timing the market”. By disinvesting when markets are down, investors lock in those negative returns. And then they miss out on the upside when markets once again begin to perform. In a world where people are living longer and saving too little, seeing this erosion of wealth is heartbreaking for financial advisors and asset managers alike, who are both set on helping clients to achieve their financial goals. Despite all the evidence and conversations pointing to the need to remain invested, many clients would have ended the year with reduced investment amounts – ignoring the advice of their trusted financial advisors and destroying their personal wealth. Looking back, it is sad to see clients who chose to disinvest who are now faced with insufficient capital for their needs. However, we can help them by continuing to manage portfolios that cater for those outcomes. I cannot predict when the market will turn, but I do know that only those who stay invested will reap the rewards of market performance. It is reasonable to say that the current market offers value, so now might be the time for clients waiting on the sidelines to start considering getting back in. For clients who continue to be cautious, it’s not necessary to invest everything at once – you could consider a phasing-in approach. At Equilibrium, we make it easy for you to help your clients achieve their goals and stay invested. We are here to help you get your clients to their goals with more certainty and less anxiety, keeping them on their journey to achieving their investment outcomes. Our purpose is to create a sustainable investment proposition built with your clients’ objectives in mind. We know you and your clients are unique, and investing is personal. That’s why we offer purposefully built solutions capable of achieving particular and defined investment outcomes. We really do live in a world that is, at times, crazy or chaotic (2022 is a prime example of this), it can be cruel (especially to those whose capital has been eroded or who haven’t saved enough) but most of the time, it’s beautiful. At the beginning of a new year, I am filled with optimism and excitement. Most of all, I am confident that our partnership with our advisors will continue to help us get their clients to their financial goals. I am grateful for the opportunity to make a difference in people’s journey to financial freedom and I am blessed to work with a team of investment professionals who truly care about making a difference in their clients’ lives. The best that I can hope for is that logic prevails, clients stay invested (or start investing if they haven’t yet) and that together we can build a better financial future for all. Equilibrium Investment Management (Pty) Ltd (Equilibrium) (Reg. No. 2007/018275/07) is an authorised financial services provider (FSP32726) and part of Momentum Metropolitan Holdings Limited, rated B-BBEE level 1.

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