Blue Chip Issue 96

BLUE CHIP COLUMN Making

BLUE CHIP COLUMN Making succession planning a success Succession planning remains a top priority for advisors in South Africa and globally. Florbela Yates, Managing Director, 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. While the ageing advisor demographic, typically in their late 50s to early 60s, is often cited as a primary driver, it is only part of the story. Advisors of all ages and backgrounds share a common concern, which is to ensure their clients are well cared for after they retire or exit the industry. Advisors often form deep, multigenerational relationships with their clients, extending to their children and extended families. This bond fuels their desire to secure a reliable successor who can maintain the same level of care and trust. As a global discretionary fund manager (DFM) and multi-manager, we work with a diverse group of advisors who differ in age, expertise and goals. Some want to retire or sell their books, while others want to grow their assets organically or are looking to buy another advisory business. Whether they aim to retire, sell their books or grow their practices, succession planning is a universal concern. Our approach begins with ensuring that the advisor’s investment offering is clean and scalable. Using specialist (asset class) building blocks means that we use the same funds across all portfolios. This creates huge efficiencies, often resulting in lower fees and means that advisors get to know the underlying funds well. It’s easier to hand over a “clean” book to a successor - making it easier to get their buy-in, explain the offering and very importantly, often results in a higher price-earnings ratio multiple being applied to the practice. Advisors deserve to be wellrewarded for the work they have put into building successful practices. Not all advisors intend to sell their books; some simply want to free up time. In these instances, they may be looking for someone to join the practice and take over some of the clients. Again, a “clean” book makes this process straightforward, especially when transitioning a smaller, manageable number of portfolios rather than dealing with dozens of varied underlying funds. For those looking to grow their books, building similar portfolios across multiple practices can streamline buy-and-sell agreements, making consolidation easier over time. Over time, it’s a matter of consolidating what is already in practice a similar underlying solution. Additionally, streamlined investment practices offer other benefits - using the same advice tools, same LISP platforms, same underlying manager as well as reducing risk and administrative burden related to licensing, compliance and reporting. Faster turnaround times and improved reporting enhance the quality of client communication, helping clients stay invested and better reach their financial goals. It also means that our advisors start to work smarter - not only harder. Removing admin and compliance burden from advisors results not only in efficiency but also cost and time savings. In many instances, not only do advisors now have time to focus on interests outside of work, but often they land up offering additional services like investor days and behavioural finance analysis to their clients. And for advisors on both extremes of the spectrum - those selling and those looking to buy books - now have time to actively look for these opportunities. We can assist by trying to match them to providers whose job it is to focus on consolidation, further facilitating seamless transitions. At Equilibrium, we bring improved balance into your financial advice practice to enable you to do what really matters - spending more time with your clients and building your business. To find out more, visit eqinvest.co.za. Equilibrium Investment Management (Pty) Ltd (Equilibrium) (Reg. No. 2007/018275/07) is an authorised financial services provider (FSP32726) and part of Momentum Group Limited, rated B-BBEE level 1. 18 www.bluechipdigital.co.za

Empathy: tonic or toxic for client relationships? COLUMN Financial planners have the privilege and challenge of often dealing with clients in emotional turmoil. BLUE CHIP Rob Macdonald, Independent Consultant Rob Macdonald has held several senior positions in the investment industry. He is an independent consultant and coach who also 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 the author of the book The 7 Pillars of Financial Health and is coauthor of Rethinking Leadership. Macdonald has a Master’s degree in Management Studies from Oxford University and is a CFP® Professional. Death, divorce and retirement are just some of the life events that can trigger profound emotional responses from clients. This makes the ability to be empathic a key skill for financial planners to develop. Yes, it is a skill. The reality is some people are more naturally empathic than others, but the good news is that we can all develop empathic skills. The bad news is that empathy has got a bad rap in 2025, from none other than Elon Musk. In conversation with Joe Rogan earlier this year he said, “The fundamental weakness of Western civilisation is empathy…” He even suggests that empathy could destroy civilisation, an extraordinary perspective. Yet Musk is not alone in his view. Trump 2.0 has seen an onslaught on the virtues of empathy. The Right Rev Mariann Budde, the Episcopal Bishop of Washington at Trump’s inauguration, implored the new president, “In the name of our God, I ask you to have mercy upon the people in our country who are scared now.” This triggered negative responses from various Christian podcasters such as “Do not commit the sin of empathy” (Ben Garrett) and “Toxic empathy” (Allie Beth Stuckey). US pastor Joe Rigney recently released a book entitled: The Sin of Empathy: Compassion and its Counterfeits. In contrast, social scientist and author Brené Brown in her book The Atlas of the Heart refers to empathy as “the most powerful tool of compassion” and highlights the findings of researchers that empathy helps interpersonal and ethical decision-making; enhances short-term wellbeing; strengthens relational bonds and allows people to better understand how others see them. Like financial planners, medical professionals often deal with people experiencing extreme emotions. Various pieces of empirical research show the importance of empathy to healthcare outcomes and suggest that training can improve individuals’ empathy. Research by Prof Helen Riess of Harvard Medical School and founder of Empathetics, a business dedicated to empathy training for medical professionals, indicates that patient outcomes are improved when they are treated by clinicians who have been trained in empathy. This training is critical because the one potential downside of empathy in caring professions is “compassion fatigue”. To prevent this, being able to feel “with” someone rather than “for” them is an important empathic skill to learn. Riess has studied the neuroscience of empathy, and discovered that empathy is not just a “soft” skill, but that humans are hardwired for empathy, and that our very survival depends on it. But Riess’s experience of shadowing doctors who had poor outcomes with patients highlighted a lack of emotional connection with their patients; they were, “Going through the review of symptoms like chest pain, shortness of breath, edema, swelling, but nothing about connecting with the human being that these symptoms belong to.” Riess observes, “It’s really fascinating that in medical school, we don’t really learn much about emotion at all and yet it is the most powerful driver of whether you’re going to have trust in a therapeutic relationship.” Trust is also the most powerful driver of financial planning relationships, which makes emotional connection with clients nonnegotiable. Brené Brown believes, “Empathy fuels connection,” which suggests that just like healthcare professionals, it is imperative that financial planners develop empathy skills. Being empathic is a tonic for people who seek help from the two most important professions of the 21 st century, healthcare and financial planning. The good news is that no matter what one’s aptitude is for empathy, we can be trained to develop the skills that potentially will make a life-changing difference to client outcomes. www.bluechipdigital.co.za 19