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FPM 23102014
Contact us at AM.Clientservice@momentum.co.za or call +27 11 505-1000 for more information.
The Momentum Money Market Fund forms part of the Momentum Collective Investments (RF) (Pty) Ltd scheme and is managed by Momentum Asset Management (Pty) Ltd. Momentum Asset Management (Pty) Ltd is an authorised financial services provider, FSP licence number 623.
Contents 4
Letter from FPI
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THE BENEFITS OF SELF-SACRIFICE
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Anthony Nyiko Mkone, CFP®, Newly appointed Momentum Regional Manager
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professional in South Africa
Client Engagement 14 Anyone fluent in mumbo jumbo? 16 Clients always come first
Employee Benefits 18
Is retirement still a valid concept?
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South Africans divided over compulsory retirement contributions
FPI News & Events
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Tashin Subbiah, CFP®, Youngest CERTIFIED FINANCIAL PLANNER®
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News
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Continuous Professional Development Events 2015
Healthcare
Email marketing@fpi.co.za to subscribe.
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Critical care: Medical advice as a corrector of a dysfunctional market
INDUSTRY NEWS
FPI membership number:
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Company:
FAIS Ombud rulings show industry progress
Practice Management
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Scripting a success story
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Guide to starting a practice
Regulation
Surname: Postal address:
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Responses to RDR document start to formulate
Tax planning 48
Code:
Tax-free savings accounts: A definite factor financial planners need to take account of when doing a client’s financial plan
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Formula for success
The greatest asset in
your business A
ll advances in civilisation over the past 10 000 years have been driven by ordinary people just like you and I. They were not aliens, just the guy and girl next door. They were willing to let the hero from within come out. They became the game changers. You too are at a Kyros moment in the history of the world. Arise and shine for your time to embrace the future is now. As another year ends, I would like to share with you some tips on how to ignite the identity, talent and purpose within you.
As a financial planner/advisor, what is your greatest asset? I have posed this question to countless financial planners and advisers in South Africa, Canada, the Caribbean, India, the Middle East and USA over the past two years. The answers have been varied but very few ever got it right. What is the one asset you have that no other financial planner/ advisor or company has? Think about it. Some say it is their product basket, systems, brand, qualification, etc. While these are important and maybe even critical, they are not the most important assets. The reason they are not the most important assets in your business is that they can be copied. If you have a great product, it won’t be long before someone copies it and your advantage is gone.
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So what do you have that cannot be copied? It is you. You are the most important asset in your business. You are unique in every way. You have a unique identity, a unique set of talents and gifts and a unique purpose. When you combine identity, talents and purpose, you have a unique formula for success, a unique differentiator and a unique competitive advantage. The best your competitors can do is to imitate and imitation leads to limitation. Spend time developing you, sharpening your talents and turning them into strengths. Remember clients don’t buy products, they buy you. Embrace the unique you, harness your unique talents and live and work for a purpose; something greater than making money or paying the next month’s bills. You are everything you need for success; starting today, sweat the one asset that can never be copied – you. Your clients don’t do business with the products you offer. They are not in a relationship with your products. They do business with you; remember there are prospective clients out there waiting for the real you to show up so they can do business with you. You are the greatest asset in your business.
Max Moyo
Inspirational orator and executive coach | Ignite My Potential
life insurance
Save up to 60% on life insurance Myriad policyholders and Multiply members can save up to 60% on their life insurance premiums. To find out more, please contact your marketing adviser or visit www.momentum.co.za/multiply
Terms and conditions apply. Momentum, a division of the MMI Group Limited, is an authorised financial services and credit provider. Reg. No. 1904/002186/06.
The benefits of
self-
sacrifi Many of us may believe that volunteering our time and expertise is a very generous yet expensive gesture. After all, pro-bono is time and time is money, right? Newly appointed Momentum regional manager, Anthony Nyiko Mkone, CFP®, shares his experience with us. Anthony believes that doing pro-bono work has advanced his career and added to his self-actualisation journey. In a nutshell, pro-bono has allowed him to express his humanity and love for his community. We also met up with Tashin Subbiah, CFP®, another rising star. He shares his achievements and aspirations on how he plans to make a bigger mark in the industry. Don’t be misled by his age. At 23, the youngest CFP® professional in South Africa, Tashin is proving to be a remarkable young professional.
Both CFP® professionals’ interviews were conducted by Mandisa Magwaza, Value Proposition Consultant at the Financial Planning Institute. Want to share feedback on the profiles? Interested in being featured on our next issue? Write to us at communities@fpi.co.za.
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ice Anthony Nyiko Mkone, CFP速
Tashin Subbiah, CFP速
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y n o Anth e n o k M Anthony ® Nyiko Mkone, CFP Newly appointed Momentum Regional Manager Tell us about your recent promotion, what does it mean for you?
economy in that, if we have a physically and financially well population, we can achieve so much.
I feel excited to have joined Momentum as the regional manager for Soweto and surrounding areas. Having being raised in Soweto, I understand the culture of the people that reside in the areas I’m heading up. I did not think twice when this opportunity presented itself; it became a perfect fit to my career ambitions and aspirations. The fact that a large population of Gauteng resides in and around my area of responsibility made the decision to take up this opportunity extremely easy.
What makes this role great and how does it complement your skills?
I hope to make a difference by helping change the world one person at a time; I see my role as making a huge contribution to the
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Having to deal with professional brokerages and shaping young and upcoming intermediaries makes waking up every day exciting as there are always new dynamics to my role. Being a CERTIFIED FINANCIAL PLANNER® professional allows me to give expert advice to our panel of brokers. What really makes my day is helping intermediaries realise their true potential.
In a nutshell take us through your career journey.
• My journey started when I received a scholarship to study the Bachelor of Administration Degree with my majors as financial and investment. I attained this qualification at CIDA City Campus. I am a person who values education and saw the scholarship as a springboard to a bright future. • I then worked for reputable companies in the financial services industry. Even with an impressive degree my career journey was not always smooth sailing. I started work as a waiter, worked at retail stores and call centres, and patiently climbed the corporate ladder because I knew I was destined for more. When I secured my first ‘permanent’ job as a financial advisor, my parents were very skeptical and concerned. Sustaining a living based on commission did not give them a sense of security and, added to that, I had just purchased my first car.
• Just over a year into my role my mentor gave me a referral for a prospective client. The client and I met over coffee where I collected his data to conduct a proper financial needs analysis. I phoned my client to touch base and to secure a second appointment but instead of securing the appointment I received a job offer. Our initial meeting was apparently my interview and I had done very well, despite not knowing. It is always important to conduct yourself professionally because you never know who you might meet.
How stressful is your job? I am getting bald! That’s why I had to shave my hair as I have some grey hairs coming through. The job is demanding, but there are a lot of intrinsic rewards; for example, when my clients offer words of gratitude. That always has a way of alleviating stress and provides perspective. The compliments and words of appreciation serve as a welcome reminder of the value I add to the organisation and people’s lives.
Why did you decide to pursue the CFP® designation? I value education; I am amongst one of the first people in my immediate family to obtain a bachelor’s degree, let alone a postgraduate qualification. I needed to set a great example to all my siblings. Completing my Postgraduate Diploma in Financial Planning was not that easy, my studies required a lot of focus, commitment and sacrificing of social time. The reward is that I am better skilled at not only helping people manage their finances, but I have empowered myself as well. I am the finance guru for the Mkone clan.
Career wise I always knew that a professional designation is vital. Early on in my career I applied for financial support from my employer so that I could complete my postgraduate studies and apply for the CFP® designation. My proposal was kindly declined due to that fact that I was relatively new in the organisation, however, there was a promise of review at a later date. This outcome did not dampen my spirits and I couldn’t wait to study at a later, undetermined date, so I used my personal savings to further myself. As a professional, my perseverance and determination to attain the highest standard of excellence in our profession has not only helped me reap great rewards, but I am confident that I can add value to my intermediaries and their clients. My insight on critical matters facing their business is appreciated, and I am able to engage with them on a professional level. Being a proud member of FPI, my professional growth has been developed. I enjoy attending the Continuous Professional Development (CPD) events. I appreciate this platform of engagement as it allows me to network. The networking opportunity has been immeasurable as I have been able to build solid relationships with fellow professionals industry wide.
order to make life more fulfilling for another human being. I started wanting to make a difference during my final year at university. I was involved in a project with Liberty and Johannesburg Stock Exchange (JSE) called the Investment Challenge. It was a financial and investment literacy programme where high school learners and university students learn how the JSE worked. The focus was on how one would invest (we used fictitious money), when it was the right time to invest, what asset classes are and how you would read and understand the investment section of the newspapers. I was involved with this particular pro-bono project for three years. I adopted four schools including my former high school, Sekano Ntoana, in Soweto and mentored learners from grade 11 and 12. I feel the learners benefited a lot from learning what really happens in the financial markets. I still keep in touch with them via a Facebook group and have noticed that a lot of them pursued a career in finance. My personal vision is that I would like to bring people out of financial lack into financial freedom. I grew up in Soweto, an area stricken with low economic activity and a high unemployment rate. I witnessed a number of negative things happen around me; I now feel that I now have the tools to help my community
Why is pro-bono close to your heart? The projects I volunteer with are very important to me. They represent an opportunity for me to give of myself in
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make better life decisions and better money decisions. I really think there is a great potential in promoting financial literacy as many of our social ills stem from lack of money or poor money management. My strategy is to also assist young people from an early stage, before they adopt too many bad habits. I want to approach young graduates or matriculants who are entering the labour market and don’t see any harm in investing a great percentage of their income to paying bad debt. I also made a few financial mistakes during the formative years of my career. I want to help others avoid that and to prioritise better. The FPI MYMONEY123™ financial literacy programme is a great tool as it covers the basics of financial planning which is budgeting, debt management and lastly savings and investment.
What do you think financial planners can do to improve public trust? Put the clients’ needs first. I think that will make a tremendous difference in communities and the people we help. I am not implying that financial planners and intermediaries put monetary gains before clients’ needs; but we have a handful that do. We still need to go a long way to earn back the professional trust. There is value in the implementation of legislations like Treating Customers Fairly (TCF). I would love if every financial planner who does not belong to FPI subscribe to a high code of ethics. Ethics must be entrenched in professional conduct not just in studying them.
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Your advice to young professionals? • Instant gratification does not work. Have an end-goal and work towards it. • Invest in yourself and your professional profile. • Luck is when preparation meets opportunity. • Become a lifelong learner, this will propel you to reach greater heights. I come from a strong Christian background, so you will have to forgive me if I sound evangelistic. I feel there is a higher power that has always been at my side, holding my hand and guiding me all the way. It would be easy to say that I accomplished a lot of things on my own, however, my intellect and drive coupled with grace, mum’s prayers and family support has brought me closer to greatness; God guides me.
What is the company culture at Momentum? One of the interesting learnings since joining the company is that job titles exist, but those titles do not define the person. The open plan set up at our head office reflects our approach to having an open working environment. It’s not a one-man show, senior management display great leadership and
take their position of responsibility very seriously. All in all, I would say if you have talent, it will be nurtured at Momentum.
What was your childhood like? A big part of my childhood years I spent living and being raised by my granny. We stayed in a four roomed match box house in Soweto. What seemed to me like deprivation of fun and a killjoy when I compared myself to other children, I now appreciate her stern hand because her values actually shaped the Anthony that I am today. She is gone now, but I learned a lot from that old lady; she instilled a moral compass in me.
What is family life like now? I now have a family of my own, a beautiful wife and two daughters (a toddler and an infant). I am an extremely busy man after hours as my daughters keep me on my toes. I am also outnumbered as the only thorn among the roses in the house. My toddler has now started choosing ties and clothes for me to wear.
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n i h s Ta h a i b Sub Tashin ® Subbiah, CFP Youngest CERTIFIED FINANCIAL PLANNER® professional in South Africa Were you surprised to learn that you are the youngest CFP® professional? Yes, I matriculated at the age of 17 and completed a BCom (Accounting) Degree directly after that. I have always tried to study as diligently as possible despite the distraction of freedom one experiences at University. My parents always reiterated the words ‘study now and play later’. They offered me a promise of freedom if I prioritised my academics, which would open doors for my future, over a social life that would eventually fade. Back then it seemed somewhat unfair and restrictive but I now see how beneficial their advice was to me. I learnt to be grounded early on in life. At the age of 22 I completed my Postgraduate Degree in Financial Planning, signed on for the mentorship programme and attained my CFP® designation soon after that.
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What influenced you to choose a career in financial planning? My initial career aspiration was to become a chartered accountant. I was a very diligent student. At the end of my third year I was preparing to serve my articles at PricewaterhouseCoopers. After consulting with a few mentors, I realised that the career path that I had initially chosen was not ideal. My confidence in my decision depleted, and I questioned the sense of job fulfillment I would gain in the field of accounting. Accounting as a profession has its merits and I feel it complements financial planning. My parents are both members of FPI, and they never persuaded or pressurised me to choose financial planning as a career, however, they supported my decision to attain the CFP® designation. I could have chosen to practice
in the financial services industry without a CFP® designation, but my parents had instilled another important lesson in me, one of never settling for average, instead aiming high as the sky is the limit. The CFP® designation is the highest accreditation in our industry so I focused on that. I hold our profession in high regard and have experienced other professionals such as doctors, lawyers, accountants and engineers sharing the same sentiment, most of who make up a significant portion of our client base.
Tell me about the organisation you belong to, Ravi Subbiah and Associates. The professional practice was founded by my father Ravi Subbiah. Prior to establishing the business, he was a Sanlam broker consultant,
and I can clearly recall the company’s humble beginnings. When he started the business he had a single desk, an office chair, a computer and a single filing cabinet but due to hard work, late nights and dedication the practice has experienced significant growth in terms of numbers and the profile of clients we serve. As a practice, the principal of client centricity is part of our ethos and I believe this is the key to our success. I am very proud of my parents who have excelled in the financial services industry and also proud to belong to the family business built from hard work and perseverance. In future, I would like us to have a greater focus in tax planning; this is where I am adding value to the business. I enjoy tax planning because while one issue may be simple the next could be highly complex; it also combines my initial passion of accounting both in theory and application. The legacy I would like to contribute is one of substantial growth to our business, to ensure I always give 110 percent. As a family member who works in a family business you may experience people who readily assume that you receive everything on a silver platter, however, that is not the case. I, like any employee, have to prove myself to earn recognition so that, in turn, I can grow the practice even further, allowing for long-term growth and sustainability that can be passed on to future generations within the family, should they be willing to accept the challenges that come with financial planning.
Why is the principle of Treating Customers Fairly (TCF) important at Ravi Subbiah and Associates? Client centricity is very important to us; we always strive towards the motto ‘client first’. Being honest and providing the best advice possible is important to us as it mirrors not only who we are as professionals, but creates a reflection on the industry as a whole. We certainly sleep better at night knowing that we have done right by our clients, which in essence is one of the pillars of financial planning. As such, TCF has been our approach even before the industry promoted it; it assists us to develop trust and build sustainable relationships with our clients. Without our clients we have no business.
them the stability to reach lifelong dreams that otherwise wouldn’t have been reached without sound financial planning.
What is your view on the importance of Continuous Professional Development (CPD)? CPD ensures that the people rendering services within the industry are competent and allows for them to adapt to the changes within the industry itself. CPD is a necessity as it allows professionals to remain competent and ensure they grow in our dynamic industry by giving clients the best possible service and bringing pride and integrity to our profession.
What is the biggest compliment a client has expressed to you? I have a good relationship with all our clients, however, the most recent value I have added is while assisting a client file his tax return. He has always consulted another tax practitioner and after every return had to pay the South African Revenue Service (SARS) at the end of every assessment despite always being fully compliant with his taxes. After a thorough and proper review of his documents we were able to receive a refund from SARS; this was a first for him and because of it he expressed a great amount of gratitude for our attention to detail and skill not just in his taxes but in all aspects of work regarding his financial planning. We always strive to be there for our clients even at times when they seek help after hours; it is all part of building a sustainable practice and our clients know that they can always rely on us to get the job done.
What is the biggest lesson you have learnt in this industry? You could be the youngest CFP® professional in the country, but you don’t know everything. There’s always room for improvement, always room for growth and always room for someone to teach you something new. My mum and
dad are great mentors both in my personal and professional life, plus my girlfriend always ensures that I never let my accolades get to my head; instead she motivates me to aim even higher and push the boundaries of success each and every day.
How do you manage the dynamics of business and family? We are a very open family. We can talk about anything and everything, nothing is held back; if we have issues, we will discuss them and work it out then and there. We also don’t hold grudges, no matter what you say, and how you say it, it’s always forgiven. Conflict is inevitable when family is in the same industry, however, we choose to make peace and move forward. I suppose the other beneficial factor is that while growing up, my parents and I always had a close relationship. They have played an array of roles in my life as my friends, my confidants, my mentors and pranksters! As a family, we try to strike a balance between family life and our business. We ensure that we take regular family breaks and leave work aside. Quality family time takes precedence on those occasions. I also have a younger sister, who’s in her first year at university. I want to set an example and be the best role model for her. My parents always tell me that if something happens to them I would be responsible for her; therefore, I always have to make sure that I push myself which in turn encourages her to do the same. So I guess striving to be the best in the business balances out family life when it equals success for the family as a whole.
What are your hobbies? I occasionally play squash and indoor soccer and I religiously visit the gym. This helps to keep me in optimum shape mentally and physically.
What is the most fulfilling part of your career or job; what is the biggest thing you take away from what you do? Constantly engaging with people on a personal basis, is one rewarding aspect of my career. My job allows me to help our clients realise and achieve financial goals giving
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client clientengagement engagement
Anyone fluent in
mumbo jumbo? I
cannot tell you how many times I’ve started reading policy wording and after the first few paragraphs given up in my attempt to understand it. As a literate South African woman, I found myself feeling rather incompetent; almost questioning my ability to understand the often overcomplicated language we call English. Had my parents wasted their hard earned rands on what they thought would be a good education, one that would equip me with all the skill needed to succeed in the corporate world? Absolutely not! The problem was not that I had somehow lost my fluency in the English language; the problem was that I had never been taught mumbo jumbo. By Wende Davids, Plain Language Specialist and Customer Experience Officer at the Financial Planning Institute.
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So there I was calling up the insurance company hoping that they could translate their mumbo jumbo into plain English for me. Reading a few clauses to the agent on the line,
and then listening to their interpretation of what was written, left my brain paralysed; my interpretation of the clause was so different to what they had explained. No, seriously, I could not have gotten it that wrong; or could I? It was time for a second opinion, so I pick up the phone and call again – crossing all fingers and toes, hoping and praying that I speak to a different person. Oh joy, the voice on the other end does not sound familiar at all, definitely a different person, so I start my story all over again desperately seeking an explanation that would make sense to me; proving that I wasn’t as dumb as I felt. Much to my horror, the explanation I received differed from the first agent I had spoken to, but it also did not come close to what I had interpreted the clauses to mean. I quickly made up my mind that this insurance company wrote their entire policy wording to
confuse the daylights out of me and every other policyholder; probably for their own benefit in the event of any legal disputes. Their staff seemed to be pretty confused by it as well; so I walked away like a proud peacock, head up, and tail feathers on display – my intelligence had not been compromised.
There are tangible and intangible benefits to plain language One of the Treating Customers Fairly (TCF) principles is that customers must be given clear information and kept appropriately informed before, during and after the time of contracting. If the information you are giving your customer is not clear to them, then you are going against this very basic requirement. Let’s look at this clause from an insurance contract. “Claim in respect of Cashless Access Services will be through the XYZ provided admission is in a listed hospital in the agreed list of the networked hospitals and is subject to pre-admission authorisation. The XYZ shall, upon getting the related medical details/relevant information from the insured person/network hospital, verify that the person is eligible to claim under the policy and after satisfying itself will issue a preauthorisation letter/guarantee of payment letter to the hospital mentioning the sum guaranteed as payable, also the illness for which the person is seeking to be admitted as in-patient.” *excerpt from the Oriental Insurance medical policy. Perhaps the example given is not as complex as other clauses one would find in a contract, but let me show you how even this paragraph can be simplified for your target audience.
“The cashless facility is only available for treatment in XYZ approved network hospitals. The procedure for using this facility is as follows: 1. You must get authorisation from XYZ before being admitted into the hospital. 2. You must give XYZ all the medical details and information that XYZ will ask you to give. XYZ will also request information from the hospital, and will verify whether you are eligible for a claim under this policy. 3. XYZ will give the hospital a letter of authorisation or guarantee of payment that will mention the amount and the illness XYZ will pay for under the policy.” By simplifying your communications you are guaranteed to see the following tangible and intangible benefits: 1.
2.
3.
Your communication will be more effective because you have expressed your intentions clearly, giving customers the certainty they need. Your business efficiency will improve because you will have fewer customer enquiries or complaints relating to misinterpretations. You will have a competitive edge over others by giving your customers clear, concise and meaningful information and this will quickly translate into customers feeling a greater sense of trust.
4.
It will also give customers more confidence in your business. Plain language speaks to clear thinking; if your documents display poor thinking, your customers may not be too impressed. If you cannot understand your business and legal documents (much like my experience), your customers won’t either.
If customer centricity is the lifeblood of your business, then communicate with them in a language they understand. Show them that they really do matter.
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client engagement
Clients always come
first One of the greatest challenges for most CFP® professionals is building a client book, and once this is accomplished, retaining these clients is even more difficult with ever-changing legislative requirements, client preferences and in the wake of everincreasing competition for large financial institutions.
By Gerald Mwandiambira, CFP®, Chief Strategist, South African Savings Institute (SASI) and FPI Media Award 2014
A
ccording to McGraw-Hill Publishing; Business Review, and Bain & Company, it is six to seven times harder to gain a new client than to retain one, and in South African Financial Planning, it is probably eight to nine times harder to acquire clients for most CFP® professionals. In a tough economic environment, it is very difficult for most CFP® designated professionals to be seen as longterm trusted professional wealth advisors, as opposed to ‘product sales and distribution’ for major financial product houses.
The case for a wealth network CFP® professionals can no longer just be seen as having a financial focus as clients continue to become more sophisticated in the wake of an abundance of free information. CFP® professionals are now required to be abreast and knowledgeable in all aspects of a client’s
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financial wellbeing and have a strong network of other professionals including attorneys, accountants, stockbrokers, doctors, real estate experts, transactional and lending specialists and other professionals that tap into the money veins of your client. It is important that the CFP® professional is seen as the wealth centre of a client’s universe. To do this, every CFP® professional must always put the needs of the client first and continue to offer value-added services that go way beyond a financial needs analysis and regular reviews. CFP® professionals that adapt and continue to upskill themselves are putting their client first. The simple reality is that if a CFP® professional does not establish themselves as the centre of quality solutions and wealth creation, another professional in your client’s network will do this, relegating the CFP® professional to the stereotyped financial advisor who sells products which clients may not need.
Remuneration and ethics standards Naturally, fair remuneration for advice rendered is essential, but this must be done within the confines of the FPI code of ethics. The FPI Code of Ethics states that placing the client’s interests
first is a hallmark of professionalism, requiring professional members to act honestly and not place personal and/or employer gain or advantage, economic or otherwise, before the client’s interests. Clients must never feel that CFP® professionals sell products, but rather see CFP® designates as providing solutions. The FPI Code of Ethics also states that CFP® professionals will always be fair and reasonable in all professional relationships. We are to disclose and manage conflicts of interest. Depending on the quality of the service rendered and value addition to all clients’ lifestyle needs, most clients are willing to compensate professionals for all fees charged. The FPI Code of Ethics and Professional Responsibility essentially is our promise to clients that they are always first. Display this document prominently in your offices for clients to be assured that they are indeed first.
Management putting clients first Many practices and large institutions make a big deal of the fact that they put clients first, but my observation is that as CFP® professionals, without clients, we cannot be in the industry. Our entire existence is based on clients so our businesses are all about
clients; clients are the be all and end all. Employees and personal interest rely entirely on income derived from clients. Between Monday morning meetings, strategy sessions and administrative functions, management often starts to distance themselves from clients. In order to keep clients first, leaders must still be out in the field. Lead partners and senior managers must regularly schedule customer interaction to be in touch with the coal face of the business. CFP® professionals in management need to often step back from the VVIP clients and interact with the newest clients entrusting their financial journeys to their organisation. This interaction needs to be honest and unplanned, be part of quality-control processes and be borne out of a need to always put client first. Some findings may not paint a rosy picture, but with honest intervention, managers can build a culture where the business is responsive and dynamic to meet client needs.
Hire client-centric CFP® professionals Not all CFP® professionals naturally possess the soft skills required to interact and build relationships. Indeed, the best academic results do not always indicate the pre-requisite client skills we require. Many CFP® designates can produce exceptional plans for clients without interacting with clients direct, whilst other CFP® professionals build relationships and acquire client information naturally. When interviewing new CFP® professionals, ask, “What do you do with random free time in the office?”. When the interviewee prefers to catch up on administration, or
doing random operations reviews, consider letting this candidate go unless you require a CFP® professional in your operations team. If your interviewee answers, “I call my clients to catch up,” or “I go on a customer visit,” this may be a client-centric CFP® professional in the making. Select front office teams that want to know what the customer wants, for without clients, the best administration systems and processes count for naught. Businesses need a successful front office team that puts clients first.
Para-planners and back office teams The compliance and back office teams must also be involved in putting clients first. Customer-facing CFP® professionals must meet with back office teams regularly to explain how their roles are linked to putting the client first. Whilst remaining compliant, back office work directly impacts all clients and often the best solutions that enhance your value proposition come from the back office teams themselves. The back office team must always feel they are integral to putting clients first. Every aspect of a business must be considered from a client’s view; with areas many may not consider client-facing being most important. An effective business must listen and respond to all clients (new and old). Businesses will be encouraged by what they learn and will not have to add ‘putting the client first’ in marketing material, mission and value statements, as the business will be all about your client from end to end. Putting the client first is an experience which is confirmed by clients, and this is seen by growing business with strong referral networks. Is your business all about the client’s experience?
17
EMPLOYEE BENEFITS
Is retirement
still a valid concept? By Patrick Barker, Private Client Portfolio Manager at Cannon Asset Managers.
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s retirement an idealistic industrydriven concept or is it really the picture-perfect period of peace and reflection worth striving for as a ‘natural progression’?” asks Patrick Barker, private client portfolio manager at Cannon Asset Managers. In most countries, the concept of retirement is relatively recent, having been introduced during the late 19th and early 20th centuries. Until then, short life expectancy and the lack of financial provisions (pensions) meant that most workers continued to work until death. Germany was the first country to introduce an old-age social insurance program, in 1889, and thus the notion of retirement. If we look back at this period, the early 1900s saw this concept developing from almost deliberate invention. A variety of interest groups wanted to move older people out of the labour force so as to accommodate younger ones. The age of 70 was determined as being the ‘retirement age’ and it was later reduced to 65. Manual labour dominated the working environment, and it was not expected that one would live beyond age 63. As life expectancy grew, this evolved into the youth subsidising the pensions of the elderly.
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The social security system in the US was established around exactly this fact. People would pay towards this in taxes but seldom benefit because they never lived long enough. In 1937 when the system began in the US, there were about 20 workers paying an annual tax of $30 to support each retiree. By 2011, when the first baby boomers turned 65, there were about two workers per retiree paying an annual tax of up to $15 000. Nowadays most work is mind and knowledgebased and with medical technology, people are living longer and longer. As an aside, it is expected that children who are born from 2033 could live beyond 400 years old. We have already identified more than 60 genes responsible for our aging and there is enough evidence to suggest that living for thousands of years is possible. Dr Aubrey De Grey, chief science officer of the SENS Research Foundation believes that the first person to live to 150 years has already been born and the first person to live to a 1000 is likely to be born less than 20 years after that person reaches 150. As man gains a better understanding of how to manage physical health and scientists are developing ways to extend life expectancy, we will extend our lives. For example, the expected development of a sunscreen pill from reverse
engineering how coral reefs protect themselves against the sun. 3D printing is already being used to create artificial body parts – developers are working on a machine that can print skin directly onto a burn victim – and soon you will be able to go to the dentist and have your mould printed there and then. This poses a challenge financially and psychologically and places a different perspective on how you plan your life. If we believe that retirement is invalid as a concept and that we should retire when we cannot work anymore, perhaps our planning process will change. How much we accumulate and need to accumulate changes and how we invest changes. After further lowering the retirement age to around 60, countries have more recently extended it because their social systems cannot fund retirees and work contracts are starting to be re-structured to accommodate longer working terms. In addition, far fewer people can afford to retire now, given a lack of planning or understanding of inflation, compounded by the fact that people are living far longer than their money lasts. How should we deal with these realities? What about waking up with a purpose? There is enough evidence now to support the notion that life is purpose-driven. Research conducted on tribes in the world which have been unaffected by modern ‘civilisation’ has focused on their long life expectancies. The main reason that could be put forward for such longevity is that the elderly all have a function in the tribe and, therefore, wake up every day with a purpose. There are many stories of people retiring and passing on soon afterwards or becoming so disheartened with life that they end up depressed and lonely. This has been attributed mainly to a lack of purpose and a disconnection from what they have known all their lives. This is based on the belief that everyone has a purpose or reason to be in the world which is the foundation of some philosophies and religious doctrines. Will we become more of a communitybased world in which we use the wisdom of age to synergise with the energy of youth? Will employment agencies emerge that cater for the 65-year plus market, placing people into companies accommodating their ability while working
shorter hours? Perhaps we will realise we have less of an unemployment problem but rather an employment problem because we refuse to acknowledge the wisdom of trained and experienced older people. In numerous countries this is starting to change which will be encouraging to many. Employment agencies are emerging with a focus on the over 60s and placing people in positions that accommodate their energy levels and abilities. An example of this is contracting people to work three days a week for five hours a day and rotating this to fill the time completely. How should the financial services industry respond to this? Should it continue to tell investors the story about retiring and putting their feet up knowing that this possibly does not serve their best interests? Or should it expand their awareness and edify their validity in society by encouraging them to plan to be in a position to retire but to aim to carry on contributing to society? This would certainly result in solving the financial problem of living longer or having not provided enough for forced retirement, and it would also provide people with a quality of life until they cannot contribute anymore. Although the current system of retiring relatively early in life appears morally questionable and psychologically devastating for many, what is extremely encouraging is that the industry is growing in awareness of these challenges and the subsequent opportunities that exist from a simple change in thinking. And the man in the street is sure to follow suit and embrace this shift in thinking by gearing up for longer working lives and better investment planning. Investors need to plan ahead if they wish to be in the best financial position to retire, taking into account the longer life expectancies, although they could also opt to work until they are no longer able to do so. Education of clients is a vital component of an asset management strategy, and this should continue to be highlighted to them. Working in conjunction with a client’s wealth planner, asset managers should encourage investors to understand what growth they require from their investments to provide sufficient capital for their future. Investors should seek out options that will accommodate their needs and help them realise those objectives. The best alternatives are flexible and designed to move with the times.
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EMPLOYEE BENEFITS
South Africans divided over compulsory
retirement contributions By Christy van der Merwe
While some South Africans do take action to increase their retirement savings, many do not and are concerned about their ability to save for retirement, and yet, most consumers want to have a say and some control over their retirement fund. 20
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raig Aitchison, GM corporate customer solutions at Old Mutual Corporate says that “government should therefore act to create a retirement saving system that encourages all employees to save for retirement, and offers them employer-sponsored plans with some form of decision-making participation in terms of fund offerings, as well as an opt-out option.” This was corroborated by an Old Mutual Corporate Auto Enrolment Research Report, which showed that South Africans who do not currently have a pension or provident fund are divided on whether a government-sponsored pension fund should be compulsory or not. The report surveyed more than 800 workers between the ages of 18 and 64 (either full-time, part-time or self-employed) who do not currently have a pension or provident fund, to gauge how satisfied workers are with their financial provision for retirement, as well as ascertain their views on compulsory retirement funds.
Employer-sponsored pension funds preferred Respondents were also asked how much they liked the idea of the implementation of an employer-sponsored pension fund. A significant 67 percent indicated they liked it either ‘very much’ or ‘somewhat’. Aitchison says that the research highlights consumers’ strong interest in having a say and some control over their fund, with 66 percent of respondents stating that the employee and employer should jointly decide on fund investments. When asked which fund they are more likely to join – assuming the benefits are the same for both – 49 percent of respondents selected an employersponsored pension fund, while only 15 percent chose the governmentsponsored fund. “We believe this choice is influenced by people wanting to participate in the
investment decision-making process, and consumers may feel they are less able to influence a government-sponsored fund than an employer-sponsored fund.”
South Africans not prepared for retirement Many of the findings in the survey highlight the urgent need for government to implement retirement reform initiatives. The survey found that the majority of respondents hold a bleak outlook of their current financial situation, and almost one in five revealed that they would supplement their retirement funds by looking for another job in retirement. When respondents were surveyed on the things they could do differently to make them feel more secure and satisfied when they retire, 43 percent said that they would increase their monthly savings contributions. However, with the current pressure on household incomes, some respondents said they would find it difficult to put extra money aside for retirement savings.
Divided views on compulsory government-sponsored pension fund One proposed solution is the introduction of legislation that will make it compulsory for every employee who does not currently belong to a pension fund, to belong to a government-sponsored pension fund. The survey revealed that 51 percent of respondents believed employees should not be allowed to opt out of such a fund, while 49 percent indicated they should be able to. According to Aitchison, those respondents who selected opt-out are mainly driven by the principle of having the right to choose (55 percent), followed by a concern that they might not be able to afford the contribution due to limited monthly income (18 percent). “In comparison, only eight percent cited a lack of trust in government. It is encouraging that this is not seen as a leading reason for why respondents should be allowed to opt out of the fund.” Aitchison says full-time and part-time employed respondents were significantly more likely to choose to be part of the fund, while self-employed respondents were significantly less likely to do so.
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FPI NEWS
The Financial Planning Institute advocates high school pupils’ money talk working environment to assist her in gaining the relevant financial planning experience needed to obtain the CFP® designation, once her NQF Level 8 qualification is complete.
An initiative by Provincial Treasury & Members of the Association
SPONSORS & PARTNERS
Sponsors and partners:
Organised by the KwaZulu-Natal Financial Literacy Association, Financial Practitioners Development Trust, Provincial Treasury and the KwaZulu-Natal Department of Education as part of the In School Youth Focus Group Programme, the competition gave learners a platform to convince a panel of judges about their knowledge and understanding of the subject matter. Learners were only given five minutes to elaborate on one of the following topics:
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ive minutes can change your life”, said Amanda Malinga from Dundee High School in KwaZulu-Natal (KZN). She walked away with the first prize at the 2014 KZN Grade 11 Speech Contest for Finance, themed Talking Money. The event was held on Friday 17 October at the Umbumbulu Campus of the coastal KZN FET College in Kwamakhutha. Malinga won herself a bursary to study an undergraduate and postgraduate degree in financial planning at one of the FPI Approved Education Providers, sponsored by the Financial Planning Institute (FPI). Over and above the bursary, the Institute sponsored her with an Apple iPad 2, pre-loaded with the Financial Planning Handbook. FPI has committed to helping Malinga find a
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• Who should I consult about planning for my financial future? • Being my own ‘umphathi’ (umphathi means boss). • Consumer Protection: is it real? Malinga was challenged by 11 other learners, who were equally good, however her biggest competitors were Mbaliyethu Magwaza from Eshowe High School, Nolwazi Naledi Zungu of Newcastle High School and Minenhle Mthembu from Ladysmith High School. Sherma Malan, FPI senior certification manager, noted that the sponsorship is in line with FPI’s transformation strategy, and the Institute’s mission to create awareness about a career in financial planning and to provide a learning pathway in order grow the number of CFP® professionals in South Africa.
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From left: Artwell Hlengwa (Chairperson of KZNFLA), Amanda Malinga and Idah Zwane (KZN Provincial Treasury)
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FPI empowers over 2 000 South Africans through its free financial
planning sessions During Financial Planning Week, run by The Financial Planning Institute of Southern Africa (FPI) on 25-29 August 2014, it was discovered that the majority of people still struggle to get through the month on the salaries they earn. Due to this, many often need to borrow money – which adds to the problem of growing debt.
initiatives, form part of its commitment to ensuring that South African’s have access to credible financial advice and tools to make informed financial decisions.
been taught the importance of budgeting and basic financial planning, which are important tools they can use to assist themselves.” Mongezi Duma, who attended the free session, said: “I found the workshop to be an eye-opener. It was a very good session which provided me with easy-to-use advice and tools. I will not need to borrow money and am now better able to manage my debt, and even begin saving.”
During this week, everyday consumers were exposed to tools and resources such as the FPI MYMONEY123™ financial education programme that focuses on the basics of personal financial planning, to enable them to make informed financial decisions. Furthermore, the participants were given access to free financial planning consultations, provided by CERTIFIED FINANCIAL PLANNER® professionals.
Speaking on the Financial Planning Week and FPI MYMONEY123™ initiatives, Francois du Toit, CFP® said: “I have offered numerous financial planning consultations during the Financial Planning Week, and am always astonished that 80 percent of the participants have never been exposed to any form of financial advice. Both these initiatives by FPI enable us to empower these individuals with the advice and resources they so desperately need to manage their finances.”
Together with the broader financial services industry, FPI will continue educating South Africans on the importance of financial planning and the value of a CFP® professional in improving one’s financial position.
FPI’s vision is to financially empower every South African and has long recognised the need for better financial management in securing ones financial future. The Financial Planning Week and FPI MYMONEY123™
Andrea Campbell, CFP® added: “During my sessions, throughout Financial Planning Week, I was saddened by how many people, especially the middle to low income earners, do not have any kind of budget in place. They have never
“We would like to take this opportunity to express our gratitude to all our professionals who generously offered their time and expertise in equipping South Africans with essential financial management skills,” said Godfrey Nti, FPI CEO.
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FPI NEWS
Transformation taken to another level
Dr Joy Papier, the keynote speaker at the graduation, emphatically stated that such a project would not have worked without the partnerships in the various spheres of education and training. A critical success factor was the collaboration between the Inseta, FETI, UWC and FPI to make this project attainable and successful. As such, this partnership made it easier and more affordable for learners to gain the right accreditation and qualifications, and ultimately will also increase the number of CERTIFIED FINANCIAL PLANNER® professionals working in South Africa.
), Tumi Peele (Inseta), Sherma From left to right: Felicia Petersen (UWC us Needham (FETI) Seam and ) Malan (FPI), Dr Joy Papier (UWC
By Sherma Malan, MBA | Senior Certification Manager at the Financial Planning Institute
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he Financial Planning Institute (FPI) has been instrumental in creating an articulation programme which was the result of an initiative between FPI, the Further Education and Training Institute (FETI), the Insurance Sector Education and Training Authority (Inseta) and the University of the Western Cape (UWC). The partnership called the FETI-HETI project, as a result of its seamless integration between further and higher education and training institutes, was formalised at the end of 2010 and implemented in 2011. This project articulated an NQF Level 5
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programme, offered at a Technical and Vocational Education and Training (TVET) college, into the UWC Advanced Diploma in Management, proving that articulation between a TVET college and a tertiary university is possible. In 2013, a second rollout of the programme was implemented with 105 learners participating. The second rollout of this programme, hosted by five TVET colleges, culminated in a prestigious graduation ceremony held in Cape Town on Wednesday, 15 October 2014. Of the 105 learners who participated in this programme, 67 successfully completed the assessments and qualified to graduate. This second rollout also witnessed a number of disabled learners that participated in the programme. Most notably was the success of the visually impaired learners who stuck with the programme and succeeded with flying colours.
The reality of South Africa’s education history is that many learners struggle to gain access to tertiary institutions and articulation in most cases is not at the forefront of education innovation. Seamus Needham from FETI, a speaker at the graduation ceremony, provided feedback from the Ministerial Committee on Articulation Policy. The committee defined articulation as the mechanisms that enable student mobility within and among the institutions that comprise of the tertiary (or post-school) system. Articulation needs to address employment as well as further learning and the committee recommended that learning programmes should be designed with horizontal, vertical and diagonal articulation to avoid dead-end qualifications. The FETI-HETI project has offered learners an opportunity to obtain an NQF Level 5 qualification with the understanding that, if they’ve obtained the qualification and passed the FPI Quality Assured assessments, they will be allowed to register for the Advanced Diploma in Management at UWC. This in turn will give them access to the Postgraduate Diploma in Financial Planning that UWC has developed. FPI was closely involved in this process and have qualityassured all learning material and assessments. UWC has since applied for formal programme approval, and once the approval process has been concluded, the university will be recognised as an FPI Approved Education Provider for the CFP® certification pathway. FPI looks forward to embarking on similar projects in the future to enable transformation in the industry and the FPI membership as a whole.
Sanlam becomes an
FPI Corporate Partner™ the Financial Planning Institute (FPI) and Sanlam – through the FPI Corporate Partner™ agreement. The FPI Corporate Partner™ agreement has been established to raise the competency levels of financial planners and financial advisors through various up-skilling initiatives. The up-skilling process provides financial planners with a learning pathway towards the CFP® certification; a designation awarded to financial planners who have met the rigorous certification standards of education, examination, experience and ethics requirements. Kobus Vlok, Chief Executive: Sanlam Personal Finance Distribution (pictured) said they, as Sanlam, are excited about becoming an FPI Corporate Partner™. This positive development is confirmation of Sanlam’s continued drive to professionalise the financial planning business to the benefit of their clients. He continued saying that partnering with FPI, the leading independent professional body for the financial planning industry, reaffirms their commitment to work towards the highest standards in the industry, and benefits all the engagement models in the financial planning business. Kobus Vlok, Chief Executive: Sanlam Personal Finance Distribution
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n the recent global Comparator Research Survey, conducted by Financial Planning Standards Board (FPSB), the results revealed that the value of a CERTIFIED FINANCIAL PLANNER® professional to business has grown in recognition. According to the survey, 60 percent of firms surveyed in South Africa, saw an increased profitability as a result of employing CFP® professionals while 80 percent indicated that CFP® professionals (in general) generate higher levels of revenue. In addition, 60 percent found that these professionals lowered their compliance and legal risks. As a result, these firms are encouraging financial planners to attain the CFP® designation, a trend supported by the partnership between
Vlok concluded that as an FPI Corporate Partner™, Sanlam looks forward to getting involved with various FPI initiatives to benefit the consumer and the wider financial services industry. The FPI Corporate Partner™ agreement provides an exceptional framework for FPI to work together with larger corporations in realising a shared objective of providing quality and professional financial planning for all South Africans. Godfrey Nti, FPI Chief Executive Officer, expressed his delight with the growing industry-wide recognition of the value of the CFP® designation. He commended Sanlam on its commitment to partner with FPI and ensuring that their professionals providing financial advice are qualified and have the necessary skills. Furthermore, Nti added that the Institute looks forward to many more corporate partnerships in the near future.
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FPI events
Continuous Profe ssional Development
Events Calendar 2015
Face-to-face events Month
Event
Regions
April
Essential Tax Update
May
Professionalism, Practice Standards and Practice Management
Johannesburg and will be streamed live to the Cape Town, Pretoria, Port Elizabeth, Bloemfontein and Durban venues. Johannesburg (x2), Pretoria, Bloemfontein and Polokwane. Western Cape (x2), KwaZulu-Natal, East London and George. Johannesburg, Cape town, KwaZulu-Natal, Pretoria, Port Elizabeth and Bloemfontein. Johannesburg, Western Cape, KwaZulu-Natal, Pretoria, Bloemfontein, East London and George.
FPI Professionals Convention
Sandton Convention Centre, Johannesburg.
June
Employee Benefits
Johannesburg, Western Cape, Pretoria and KwaZuluNatal.
June
Client Engagement (3-day workshop)
Johannesburg.
Retirement and Investment Planning (2-day workshop)
KwaZulu-Natal.
February
FPI and SAIT Budget Breakfast
February
Estate Planning
March
Estate Planning
24-25 June
August September October November
Retirement and Investment Planning (2-day Workshop) Annual Refresher Workshop Annual Refresher Workshop
Western Cape and Johannesburg. KwaZulu-Natal, Port Elizabeth, Bloemfontein, East London and George. Johannesburg (x2), Western Cape (x2), Pretoria and Polokwane.
Webinar events Month
Event
February March April May June August August September September October November
Estate Planning (1) Estate Planning (2) Essential Tax Update Professionalism, Practice Standards and Practice Management Employee Benefits Retirement Planning Investment Planning Personal Risk and Insurance Health Benefits Ethics (1) Ethics (2)
Online courses Month
Event
April
Tax Planning
June
Integrated Financial Planning (The Financial Plan)
September
Risk Management: Insurance and Business Assurance
To find out more about the 2015 events, contact the events team on (011)Â 470-6000 or email events@fpi.co.za.
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15
FPI NEWS
FPI approves industry publications for
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CPD
he smallest things in life do count; by doing something as small as reading an article you can avoid receiving Continuous Professional Development (CPD) shortage reminders. By simply reading CPD approved magazines, you can add to your CPD record. Keeping abreast of all developments in the financial services industry is important for professional financial planners to stay relevant. One way of doing this is to read FPI approved publications and while doing this you can earn your required Continuous Professional Development (CPD) points. What is CPD? It is the process of a lifelong engagement in activities
that develop and maintain the knowledge and skills of a financial planning professional and at the same time enabling them to perform competently within their professional sphere. In a bid to reduce CPD costs and add value to our members, we have signed Memorandums of Understandings (MoUs) with various industry publications to afford our members a discounted rate. There are a number of magazines, newsletters and handbooks that are FPI CPD Approved publications (see list below) and by reading these publications, you as an FPI member can earn 1 CPD point per publication, limited to 50 percent of your total required CPD points.
FPI CPD approved publications: Publication
Description
The Financial Planner
The official publication of FPI, providing financial planners with the latest industry events and changes in regulations.
Normal price: R120
RISKSA
RISKSA Magazine, the financial services title in its niche, and winner of South Africa’s PICA Award for business magazine of the year, for the third year running.
Normal price: R490
INVESTSA
A publication that provides the latest investment industry news, insights and commentary in a manner that is relevant to the financial planner in South Africa.
Normal price: R450
FPI member: 25% discount
1 point
Business Brief
A business management Magazine that provides the decision-makers in business with the information they need to make better business decisions.
Normal price: R264 (print) and R162 (online)
FPI member: 50% discount
1 point
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Annual subscription discounts Free for FPI members
FPI member: 25% discount
CPD points 2 points
1 point
Publication
Description
Annual subscription discounts
Cover Magazine/ COVER-on-theGo
Cover provides all stakeholders in the financial services industry with the opportunity to showcase their corporate profile, products and services and promote their brand in a high-quality, widelyrespected publication.
Normal price: R171
Free for FPI members
1 point
FANews/Nuus
FANews/Nuus, a magazine in the financial services and insurance industry that talks to financial advisors and brokers.
Normal price: R200
FPI member: 25% discount
1 point
MoneyMarketing
MoneyMarketing is a publication for financial advisors that focuses on financial planning, risk cover and investment matters.
Normal price: R250
FPI member: 20% discount
1 point
Personal Finance
Personal Finance covers a wide selection of topics such as banking, investing, saving, spending, insurance and more.
Today’s Trustee
Today’s Trustee is aimed largely at a new generation of South African financial leadership.
Sanlam Personal Finance
The official Sanlam publication, sharing insights for financial planners about the industry and Sanlam products.
Free
0.5 point
Momentarily
Momentarily magazine is the official financial advisor mouthpiece for the Momentum Group, a provider of insurance and asset management services to the South African market.
Free
1 point
Momentum FundsAtWork navigating tax changes
This publication by Momentum covers changes in taxation regulations that apply in South Africa.
Free
1 point
The Advisor
The official Discovery publication for financial advisors.
Free
1 point
Healthcare in South Africa.
A handbook that discusses the healthcare landscape in South Africa.
Normal price: R295.00
1 point
In Touch
The official Altrisk newsletter.
Free
0.5 point
CompliNEWS
A South African Financial Services Compliance portal.
Free
0.5 point
Momentum FundsAtWork Consolidated Legal Updates 2014
This publication by Momentum covers legal updates that apply in South Africa.
Free
1 point
Normal price: R102
Normal price: R136. 80
Free for FPI members
CPD points
1 point
1 point
For more information on the above publications, contact the FPI membership services team on (011) 470-6000 or email membership@fpi.co.za. To find out more about CPD and other member benefits, please visit www.fpi.co.za.
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fPI NEWS
FPI appoint Name: Riana Badenhorst Appointed as: Member Services Administrator
Riana is responsible for providing exceptional service to all FPI members. Riana’s outstanding customer service skills ensure that all members are provided with up to date information on all matters regarding membership. Her role also involves providing members with support relating to Continuous Professional Development (CPD) points, Education and Professional Standards.
Name: Wende Davids Appointed as: Customer Experience Officer Wende’s role is to facilitate and implement processes to help FPI understand, analyse and create a positive customer experience, taking customer relationship, loyalty and value management as well as plain language principles into account. She is responsible for managing the customer experience wherever it sits in the business. This role involves studying the company and its business processes from a consumer perspective and implementing the changes according to consumer and stakeholder needs.
Name: Sibongile Mdluli Appointed as: Business Analyst
Sibongile is responsible for providing system maintenance services for business applications and evaluates the required business functions, processes and procedures to identify areas in need for improvement. Her role involves dealing with suppliers to strategise, design and integrate computer based solutions to meet business needs of clients and stakeholders.
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Name: Lelané Bezuidenhout, CFP® Appointed as: Certification Manager
Lelané’s mandate is to manage the operational side of the certification department and to ensure the effective implementation of the certification processes and standards. She works closely with her team of administrators ensuring the smooth running and fulfilment functions of membership applications, CPD retrievals, and ensures that an effective and fair Professional Competency Exam (PCE) is delivered.
Name: Sherma Malan, MBA Promoted to: Senior Certification Manager Sherma heads up the certification department and is responsible for promoting and implementing best practice standard and ensures that the certification function is delivered within those standards. In essence, Sherma is responsible for planning, developing, directing and delivering world class certification standards and services for FPI. Her strategic oversight involves fulfilling the role of building and maintaining stakeholder relationships with South African Qualifications Authority (SAQA), Quality Council for Trades and Occupations (QCTO), education providers, continuous professional development providers and examination panel members.
Name: Angeline Mveng Appointed as: Examination Body Clerk
Angeline’s role is mainly to assists with the general administration of the examination body department. She is also responsible for updating examination documents, moderating all parcels captured, printing and re-printing examination documents. Additionally, she assists in checking attendance registers and answer sheets for each regulatory examination written.
ments Name: Jevin Tod Appointed as: Marketing Manager
Name: Kirsten Stevens Appointed as: Events Assistant
Kirsten is responsible for assisting the events co-ordinators, in the FPI Centre for Continuous Professional Development, with event planning, implementing and evaluating. Her duties involve assisting with setting up venues, registrations and logistics at all events. Over and above this, she assists with compiling and communicating reports to committee members and speakers based on the feedback forms filled out by delegates.
Jevin is responsible for developing, establishing and maintaining marketing strategies to meet FPI’s strategic objectives, as well as the effective management of the marketing, branding, advertising, events and conventions, and promotional activities of the organisation.
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31
HEALTHCARE
Critical care Medical advice as a corrector of a dysfunctional market By Christy van der Merwe
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The medical and healthcare industries in South Africa are awash with numerous role players with conflicting interests. The one thing they all seem to agree on is the costs. They are out of control. Without medical aid or insurance, the average man could not afford quality healthcare. day to resolve. But in the private sector, the growing problem of exorbitant fees, which we are unable to stop, brings a lot of inefficiency. No system can be that expensive and be described as efficient,” he reiterated. He added that the National Development Plan must deal with the cost of private healthcare, and it must deal with the inequality, inefficiency and ineffectiveness as well as the poor quality, which has come to characterise the public healthcare system in this country. Although he remained relatively quiet on the topic of universal coverage, which is known as the National Health Insurance (NHI) in South Africa, he noted that this remains on the agenda. “The NHI must be implemented in stages with relative reduction in the cost of private healthcare,” Motsoaledi said. Professor Alex van den Heever from the Wits School of Governance argues that the South African healthcare and medical industry makes an excellent case study of what not to do. Consumers have lost almost all decisionmaking capability and do not control demand. He reiterates that there are too many conflicts of interest, and there is no competing on cost or quality.
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outh Africa’s Minister of Health, Aaron Motsoaledi, has admitted that the healthcare system in South Africa is inefficient. At the 2014 Board of Healthcare Funders conference, Motsoaledi said that both the public and private healthcare sectors are inefficient for different reasons. “In the public sector, the inefficiency is brought about by the glaring problem of poor quality of healthcare – that we are trying every
Soaring costs mean that in order to remain solvent and able to pay claims, medical schemes are having to cut benefits or add terms and conditions such as designated service providers (DSPs), which limits choice of where consumers get treatment and spend their money. “There is too much finger-pointing going on between doctors and medical schemes and insurers and brokers. There are conflicts of interest and gatekeepers,” notes van den Heever. Contrary to the way things should be, he says that insurers are not agents responsible for consumers buying good healthcare. He is also careful to point out that he does not argue for more regulation, but a more intelligent regulatory framework.
Advisors to the rescue “Advice can be such a powerful corrector of a market if it is done correctly,” says van den Heever. He does, however, feel that the conflicts of interest in the advice market need to be removed. “Someone is being rewarded for directing demand,” he says.
He adds that pricing is only one indicator that things are bad. “There is no competition on quality. There is no common factor driving costs. There are major structural issues,” says van den Heever.
Advisors should question whether quality is the reason why they have chosen to promote a certain medical scheme over another. In South Africa, where straight price comparisons are almost impossible but viewed as most important, promotion on quality is unlikely.
“If you want to correct a dysfunctional market, you need to ensure an efficient basis for exchange, and put consumers, rather than product suppliers in control of demand, and create an effective market signaling based on price and quality. Correcting the market is about more than just price. Leaving the underlying causes in place won’t correct it.”
Consumers often do not know what they are buying, but the advisor has the opportunity to direct demand based on quality. However, this raises another issue – that of quality assessment and the fact that there is no solid data available to distinguish which doctor, hospital or service provider has a better track record than another. Van den Heever argues
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that clinical data (such as mortality rates, recovery rates) should be made available to consumers. It would be better to standardise the information and make it available to consumers every month. Indeed, the medical advisor’s job has never been more complicated, but at the same time more vital in South Africa. When a person or their family member is sick and requires medical attention, everything else takes a backseat. With healthcare at the very centre of every person’s life, it is clear that everyone needs good solid advice on what their options are. The healthcare landscape in South Africa is complex and complicated, and the man on the street needs a savvy advisor to help them wade through it. The landscape is so complicated because the numerous role players, from doctors and hospitals to medical schemes, regulators and administrators throughout the public and private sector, have different agendas and very seldom see eye to eye. An element of mistrust between the various role players also means that things happen in silos, making it very difficult to get a general overview.
Excess burdens In South Africa, there is much talk of the ‘quadruple burden of disease’, namely the HIV/Aids pandemic, accidental and nonaccidental injury, infectious diseases such as
tuberculosis, diarrhoea and pneumonia, and the growing incidence of lifestyle diseases related to affluence. Similarly, when it comes to financing healthcare, there are numerous issues all having an impact. The Financial Planner takes a look at some of the most pressing issues being discussed in the medical and healthcare industries.
PMBs The issues surrounding Prescribed Minimum Benefits are intricate, and bemoaned at every turn by medical schemes who state that the costs of paying for these chronic conditions is too high. One medical scheme principal offer stated that schemes could not ‘duck and dive anything in the chronic or PMB space because those are legal requirements,’ which highlights the reluctance by schemes to pay for PMBs. Council for Medical Schemes (CMS) chairperson, Professor Yosuf Veriava, notes that some medical schemes have raised concerns and even criticised the implementation of statutory provisions on PMBs, claiming that these have placed an onerous financial burden on medical schemes and even threatened their financial viability. “However, these claims are not borne out by the data at the disposal of the CMS. In fact, all evidence suggests that the medical schemes industry remains financially solid. PMBs are certainly playing a critical role by providing beneficiaries with a minimum level of cover, protecting them from financial disaster in the event of a healthcare crisis, and offering them a measure of social security,” he adds. The Department of Health document outlining
revisions of PMBs that was expected to be released before the end of 2014, and has been in the pipeline for years, is very unlikely to happen as meetings and workshops on the topic are continually postponed and delayed.
Specialist costs Another commonly heard complaint is that ‘greedy’ private sector specialists are charging exorbitant fees, particularly for PMB conditions, which medicals schemes have no option but to pay. In attempts to overcome this, schemes have established Designated Service Provider (DSP) networks where schemes and doctors come to an agreement on acceptable rates that doctors will charge. DSPs add another level of complexity to an already complex system, and the CMS notes that the majority of the complaints that it receives are related to non-payment of PMBs because patients do not get treatment from doctors within specified networks. For advisors, making clients aware of these intricacies is important.
Demarcation Because of the rocketing costs of healthcare, and increasing exclusions and co-payments required by medical schemes, which ultimately leave consumers out of pocket and facing hefty medical bills, insurances to cover these costs have emerged. “By virtue of a socially oriented rights-based policy framework, medical schemes have unfortunately been hamstrung in their ability to manage costs and have resorted to limiting the rate at which they reimburse claims, carving out certain cover and/or imposing co-payments on certain claims. A concomitant result is that members downgrade their cover simply because they are unable to afford the increases,” explains Xelus Specialised Insurance Solutions MD, Michael Settas. Gap cover products and hospital cash plans, as insurances, are governed by the Financial Services Board (FSB) and not the CMS. The CMS has tried to have these products banned, stating that they are impeding on the role of medical schemes and attracting members away from schemes. Gap cover providers, and policyholders have fought back hard, and National Treasury (NT) has declared that these insurances will be allowed to continue, however it is likely that there will be structural changes required. These proposed structural changes have been outlined in the draft demarcation regulations policy framework – public comments have been made on this policy framework, and the industry awaits the outcome. “All in all, it’s very clearly an unsustainable [medical aid schemes] policy framework yet the insurance industry now faces the prospect of NT imposing the same framework onto
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NHI Seen as a move threatening the private medical scheme industry, Veriava states that the NHI has been widely misunderstood. “I do not believe that the introduction of NHI will mean the end of the private healthcare sector or medical schemes. Medical schemes will continue to play an important role for those individuals who wish to have healthcare cover over and above that which NHI will offer. The NHI process will bring about a greater degree of co-operation between the public and private healthcare sectors. The challenge is to develop innovative approaches to promote such collaboration and enable it to flourish,” he adds. Indeed, greater collaboration between the public and private sectors is viewed as something that will unlock synergies, increase efficiency, making the most of the limited resources and skills available in South Africa. While the NHI has not been discussed as much as it was in 2013, the Department of Health is rolling out pilot projects, and work continues in readying for the implementation of universal coverage.
The diagnosis
schemes with links to insurers also offering gap cover alongside their medical aid schemes. At its 2015 contribution increase function, Medihelp announced that it would, through its administrator Strata Healthcare and cell-captive Guardrisk, offer gap cover to beneficiaries.
Market inquiry The generally high healthcare costs across the board and dissatisfaction among consumers regarding the high price of healthcare, have resulted in the Competition Commission’s market inquiry into the private healthcare sector.
the insurance industry. We strongly question why NT, who should be highly mindful of financial prudence, would wish to impose these unsustainable policies onto the insurance industry,” adds Settas. He suggests that there may have been a politically negotiated compromise between NT and the CMS in drafting the second set of regulations. “It is clear the CMS desires the banning of all health insurance but NT faced real constitutional challenges in going that route so they had to find a compromise.” There have also been whispers of medical aid
The market inquiry, launched in February 2014, aims to get an in-depth understanding of the operation of the private healthcare market in South Africa. Thereafter, the inquiry’s goal will be to identify, analyse and, where appropriate, remedy sector- and market-wide competition problems. All aspects of the private sector will be investigated, from medical schemes to hospitals, laboratories, doctors, and equipment suppliers. The commission entered its crucial investigation phase in August 2014, and hearings will take place during 2015. It is expected that provisional results will be released in October 2015.
These multitude of issues are intertwined and cannot be tackled in isolation. Very few people have anything good to say about healthcare in South Africa, painting a bleak picture. The costs have become unbearable and are the catalyst to what will surely ensure reform of the current status quo, because it is evident that deep structural changes are required to rectify matters. Making concluding remarks on some of the structural changes required, van den Heever made a number of recommendations on what should be done. These include: ensuring that health insurers [medical schemes] have the incentive to purchase efficiently; removing conflicts of interest in markets for advice; simplifying and standardising products; market transparency on key indicators central to consumer choice; internalising price and quality into contracts; dealing with regulatory arbitrage; ensuring governance arrangements correctly locate the commercial imperative in the scheme; ensuring that insurer [medical scheme] incentives cannot be undermined by anticompetitive structures and conduct on the supply side; market transparency (price/cost/ quality) should identify and eliminate conflicts of interest and accumulation and abuse of market power, which should in turn promote market diversification, and penalise abuse and collusion. No easy fix. However, once the causes of the symptoms have been identified, it is hoped that these can be remedied.
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industry news
The determining factor
FAIS Ombud rulings show industry progress By Melissa Wentzel
August 2014 marked 10 years since the Office of the Ombud for Financial Services Providers (the FAIS Ombud) was established. The annual report for the year ending March 2014 highlights some of the challenges that were overcome, the strides that were made, and the changes witnessed by the FAIS Ombud in the past 10 years.
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O
ur belief is that it is important to pay attention to our history. It is in fact a source that keeps us fortified and helps align our values and from which we are able to draw parallels from the then with the now,” says FAIS ombud Noluntu Bam. Since the 2005/6 year, when the FAIS Act came into full swing, there has been a gradual increase in complaints brought to the attention of the FAIS Ombud; from 3 806 in the year ending 2006 to 9 949 in the 2012/13 year, of which 4 288 were actionable. The short-term category of products elicited the most complaints with long-term not falling far behind, and the larger number of complaints (33 percent) stemmed from Gauteng. “Several determinations have highlighted the way consumers of the financial services industry are treated,” says Bam, highlighting the problem of products and conduct inconsistent with the provisions of the FAIS Act. The 2013/14 year saw a five percent decline in complaints with 9 439 total complaints – a positive indication of the progress being made regarding the fair treatment of customers. Investigating and resolving complaints, in terms of the FAIS Act and the rules
promulgated thereunder, is the main objective of the FAIS Ombud. The Financial Planner takes a look at some of the examples of successful determinations published in the report.
Successful settlements Failure to provide appropriate cover On 1 August 2012 the complainant purchased a stud bull for the amount of R140 000. The bull was solely to be used for breeding purposes. However, over the course of time, the complainant began to suspect that the bull was impotent. After the bull was subjected to a number of veterinarian examinations, its impotency was confirmed. The complainant instituted a claim with his insurer, but the claim was rejected on the basis that the bull was insured only for injuries resulting in death. Upset and frustrated the complainant sold the bull to an abattoir for R13 450 to recover some of his losses. He also lodged a claim with the ombud. The ombud pointed out to the respondent that they mistakenly insured the bull as ‘livestock’ as opposed to ‘live stud’. The substantial price paid for the bull (R140 000) should have been a clear indication that the bull could not be regarded as livestock. The respondent offered to settle the matter by taking into account the amount received
when the bull was sold to the abattoir. The complainant accepted the offer.
Settlement: R126 550
Failure to act with due skill, care and diligence Complainant lodged a death claim with respondent after the passing of her spouse. The claim was rejected due to a threeyear waiting period for death as a result of natural causes. The complainant could not understand this as the policy was incepted some four years ago. She then submitted her complaint to the ombud for assistance. The matter was investigated during which it was discovered that the respondent had advised the complainant to cancel an existing risk policy and take a new policy with another insurer. However, prior to the new policy being accepted, the representative proceeded to cancel the existing policy of the deceased. The new application was subsequently declined. The representative then advised the complainant to re-instate the old policy. However, this policy was now subject to a three year waiting period. The insured died within this three year waiting period and when a claim was submitted, the respondent was only prepared to refund the premiums paid. A recommendation was then made to the respondent, after which they
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industry news
agreed to settle the matter by paying the complainant an amount R734 341.
Settlement: R734 341
Failure to disclose excesses applicable to the policy During January 2011, the complainant obtained commercial short-term insurance cover for his trucks with the assistance of the respondent. The complainant subsequently lodged two claims with the insurer for damages suffered to his trucks on 31 March 2011 and during May 2011 respectively. The complainant was surprised to learn that he had to pay an amount of R15 000 for each claim as a result of an excess applicable to foreign drivers. The complainant queried this issue with the respondent, claiming that he had not been informed of the additional excesses applicable to foreign drivers. He was advised that all excesses had been listed on the policy schedule. Not satisfied with the explanation, the complainant lodged a complaint with the ombud. The respondent denied any wrongdoing in the initial response to the complaint. After the ombud highlighted the respondent’s duty to disclose all excesses and monetary obligations to the client, the matter was settled.
Settlement: R30 000
Failure to disclose concise details of any special terms or restrictions During August 2008, the complainant invested in a five-year term endowment
policy on the recommendation of his financial advisor (‘respondent’s representative’). During January 2010, the complainant increased his monthly premium on the advice of his advisor. Unbeknown to the complainant, the increase had invoked what is commonly referred to as the ‘20 percent rule’, which effectively extended the restriction period applicable on the policy with another five years. The complainant claimed not to have been advised of the implications of the proposed increase, and turned to the ombud for assistance. Upon being informed of the complaint, the respondent requested confirmation of how the complainant wanted the matter to be resolved. It was communicated to the respondent that the complainant required access to a portion of the funds invested. The respondent duly facilitated the withdrawal and deposited the funds into the complainant’s bank account.
Settlement: R7 000
Appropriateness of advice and failure to act in the interest of the client During 2006 the complainant, who was 78 years old at the time, received R9 600 000 from the sale of his inherited shares. Upon recommendation by the respondent, the complainant purchased three second-hand endowment policies. In 2010, the same representative advised the complainant to purchase a further multi-access endowment policy. The monthly premiums of R100 000 payable on the multi-access endowment were to be funded by withdrawals from the second-hand endowment policies. The complainant alleged that he had not been made aware of the high commission payable
on the transaction. He claimed that his impression was that the advice was always in his interest. Since he had discovered this was not the case, he wanted the transaction reversed. Upon the respondent’s failure to reverse the transaction, the complainant turned to the ombud for assistance. The respondent argued that the multi-access endowment was purchased in order to create more liquidity in the complainant’s estate. It was pointed out to the respondent that it was their own making that the complainant found himself with liquidity issues. The ombud was of the view that the advice was calculated to maximise commission, and a recommendation was made that the respondent settle the matter. After protracted negotiations, the matter was settled to the satisfaction of the complainant.
Appropriateness of advice The complainant was advised by his advisor to invest R1 035 179 of his pension benefits in a life annuity. While the complainant’s funds were being transferred, he requested a lump sum withdrawal from his pension benefits. The advisor adhered to the request but failed to inform the complaint about the income tax consequences of the withdrawal. The complainant was surprised when he had to pay income tax of R64 350 to the South African Revenue Services as a result of the withdrawal. Aggrieved by his advisor’s omission to advise him appropriately, the complainant turned to the ombud. Following the parties’ failure to reach a resolution, the ombud notified the respondent that it had accepted the matter for investigation in terms of Section 27 (4) of the FAIS Act. Shortly thereafter, the respondent made a settlement offer which was accepted by the complainant.
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Settlement: R457 135.70
Settlement: R64 350
Nick & Barry {000079}
Whose money is it anyWay?
When managing investments, we never lose sight of the fact that it is your money we’re looking after, and we do so with fastidious attention to detail. We even invest in our own funds, so that when we make decisions that affect your money, we’re making decisions that affect our own money too. It’s just one of the ways we ensure we align our long-term interests with yours. Because when you understand how hard someone’s worked for their money, you go to great lengths to take good care of it. For more information ask your financial adviser, call 0800 600 168, email info@psgam.co.za or visit psgam.co.za
Collective investment schemes in securities (CIS) are generally medium- to long-term investments. The value of participatory interests (units) may go down as well as up and past performance is not a guide to future performance. CIS are traded at ruling prices and can engage in borrowing and scrip lending. A fund of funds is a portfolio that invests in portfolios of collective investment schemes, which levy their own charges, which could result in a higher fee structure for these portfolios. A feeder fund is a portfolio that, apart from assets in liquid form, consists solely of participatory interests in a single portfolio of a collective investment scheme. Fluctuations or movements in the exchange rates may cause the value of underlying international investments to go up or down. A schedule of fees and charges and maximum commissions is available on request from PSG Collective Investments Limited. Commission and incentives may be paid and if so, are included in the overall costs. Forward pricing is used. The portfolios may be capped at any time in order for them to be managed in accordance with their mandate. Different classes of participatory interest can apply to these portfolios and are subject to different fees and charges. PSG Collective Investments Limited is a member of the Association for Savings and Investment South Africa (ASISA) through its holdings company PSG Konsult Limited. PSG Asset Management (Pty) Ltd is an authorised financial services provider. FSP 29524
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industry news
SAQA celebrates 18 years of lifelong partnership and collaboration
T
he South African Qualifications Authority (SAQA) celebrated its 18th birthday on 22 August 2014. The occasion also served as a celebration of Women’s Month.
The Financial Planning Institute (FPI) was invited to speak to members of staff about women and money. Prem Govender, CFP®, former Chairperson of FPI, encouraged women to take control of their finances – especially as global life expectancy figures show that women are likely to live longer than men. Govender also highlighted that women have a shorter career span than men when one factors in the time taken off work to have children, and also working fewer hours to help raise children. She encouraged staff to pay themselves first and include this in their budget. She also emphasised that one needs to cut one’s garment according to the cloth one has. This means that one must be clear on the difference between a want and a need.
Contribution to the education and training landscape SAQA has come a long way since the SAQA Act was passed on 4 October 1995. The last 18 years have had growth and challenges. The organisation started off with two directorates – namely Directorate for Framework Development and Directorate for Framework Implementation and it now has a staff complement of 215 people. At the celebration SAQA chief executive officer, Joe Samuels, highlighted great contributions SAQA has made in the education and training landscape. One of the contributions made is the National Learners’ Records Database, an inclusive information management system that holds records of qualifications and partqualifications registered on the National Qualifications Framework (NQF) as well as learner achievements. The organisation is also responsible for evaluating foreign qualifications as well as recognising and registering professional bodies and professional designations. It contributes to the development of qualifications frameworks internationally and has also conducted or commissioned investigations on issues of importance to the development and implementation of the NQF. Through the NQF and Career Advice Helpline, SAQA has assisted in the
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establishment of the Career Development Services project. A few challenges faced by SAQA, such as the review of the NQF, resulted in an affirmation of the NQF and its role in the
education and training landscape. These challenges are minor compared to the excellent achievements received in the past 18 years, including 16 successive unqualified audits from the AuditorGeneral.
SAQA’s 18-year journey and its milestones
3 August 1996
• SAQA held its first board meeting.
• The NQF and Quality Assurance Framework were established. 1998
1999
2008
2010
2012
• The first qualification was registered. • The NQF Act replaced the SAQA Act in an effort to meet the needs of the dynamic education and training landscape. • SAQA and the Department of Higher Education and Training (DHET) launched the multi-channel NQF and Career Advice Helpline reaching out to deep rural areas in our country • SAQA recognised the first batch of professional bodies including the Financial Planning Institute.
Paving the way for graduates
I
n South Africa and many other countries around the globe, students face a tough challenge after graduation to find employment, and this is mainly because graduates from many educational institutes lack practical work experience or ‘onthe-job knowledge’. As a way of up-skilling graduates, the Finance and Accounting Services SETA (Fasset), has previously offered various bridging and work readiness programmes, which are aimed at assisting graduates in securing employment. To address this need going-forward, the Ithemba (meaning to have faith or confidence) Bridging Programme 2014 has been established and will be offering training towards the South African Qualifications Authority (SAQA) accredited generic management qualification – a education programme that will ensure that pivotal learning takes place and work readiness skills are learned through a programme designed to enrich graduates with generic attributes and skills. Over and above, graduates will be equipped with SAP ERP, an e-learning course that is meant to ensure that graduates know how to navigate SAP solutions. Pastel Partner, a computerised accounting software program ensures that graduates are able work with accounting information as well as produce accounting documents and summary reports.
Ithemba is primarily aimed at students that have completed a degree or diploma at National Qualifications Framework (NQF) Level 6 or 7, such as an undergraduate qualification in financial planning, but have not been able to secure employment. As university graduates are generally more employable than those without university qualifications, this in most cases depends on the course/s that the student would have studied. The sad reality is that most qualifications that are deemed valuable do not provide graduates with the necessary skills required by employers. A large number of graduates in search of employment lack work experience and supervisory skills.
What is in it for the employer? Companies that employ young and less experienced employment seekers are eligible for the Employment Tax Incentive (ETI) that came into effect on 1 January 2014. This incentive reduces an employer’s hiring costs through a cost-sharing method with government and leaves the employee’s wage unaffected.
between the ages of 18 to 29 and earn less than R 6 000 per month in total remuneration (basic salary plus all other benefits). This incentive can only be claimed for a maximum period of 24 months per qualifying employee. Employers in the financial services industry, who are able to offer the required financial planning experience to financial planning graduates, can register to become an FPI Approved Mentorship Centre.
Who to contact For more information on: • FPI Approved Mentorship Centre, email certification@fpi.co.za or call (011) 470 6000 or visit www.fpi.co.za. • Ithemba, visit www.futurecreation.co.za or call (011) 476-5854 • ETI, contact 0800 00 7277 or visit www.sars.gov.za.
Employers who are registered for Employee’s Tax and are tax compliant with the South African Revenue Services (SARS), qualify for ETI. Employees should be South African,
These are integrated software solutions that consolidate the key business functions of small, medium and large financial organisations. The programme will offer modules from the SAP ERP Financial Solutions in an e-learning format and Pastel Partner will be offered in a classroom environment. The offering is aimed at giving graduates a competitive advantage when seeking employment in the financial sector.
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PRACTICE MANAGEMENT
Scripting Kim Potgieter, CFP速, Director at Chartered Wealth Solutions
a success story
When Wendy Phaka took on a temporary job as a tea lady at a company in Dunkeld, Johannesburg, little did she know that this would start her on a trajectory to a career in financial planning.
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them onto our records, in anticipation of client meetings.” When she started out, Wendy was aware that she required some assistance in honing her skills. She says, “To begin with, I could not pronounce English words properly, my home language being Sepedi. Donovan Adams, CFP®, one of our financial planners, was willing to help. He heard that I lacked confidence when speaking over the phone.”
RYNO Killing himself with 30 a day.
Donovan and Wendy met three times a week working on her pronunciation. She continues, “I, of course, also knew nothing about financial planning and its processes.
Wendy Phaka
T
wenty-year-old Wendy entered the workplace in 2010, armed with a certificate in Human Resources and much hope. The sad reality of the employment landscape became apparent: there were few opportunities for a young woman with no experience, little confidence and no resources to improve her education. When the opportunity presented itself for her to earn an income relieving a woman on maternity leave, she jumped at it. So, she found herself working at Chartered Wealth Solutions as a tea lady. Since Wendy is a person of initiative and commitment, her potential was quickly recognised by some of the staff members at her new company. Wendy was subsequently offered a position as an administrator, working with one of the financial planning teams. “I was both nervous and excited to be offered the position,” says Wendy, “but the practice’s team assured me that I would grow to be competent, with the right amount of mentoring.” In her current position, Wendy is responsible for attending to client queries, forwarded to her from paraplanners, dealing with relevant companies regarding capital gains tax, penalties and queries on transactions. These may require follow-up and advising the para-planner of any delays. “I liaise with call centre consultants to elicit the necessary information for us to process our paperwork efficiently,” says Wendy. “I also download and request updated statements from other companies, load
Raquel Rodrigues, a para-planner, dedicated her time to training me in financial planning, our company values and goals. We spent two hours in the morning and two hours in the afternoon every day going through what I needed to know. And the support did not end there.” Wendy’s future in financial planning become more certain when the practice offered to fund her studies. Wendy is now studying towards a certificate in Financial Planning. “With this foundation, I have hope of a bright future,” smiles Wendy. “I am honoured to be an employee at this company and am grateful for the opportunity I was offered. Without the commitment to mentoring me demonstrated by so many here, I would not have achieved the milestones that I have.” Wendy has her sights set on being a CERTIFIED FINANCIAL PLANNER® professional in the future, and is committed to studying and working towards that. As an FPI Approved Professional Practice™, the practice acknowledges the importance of mentorship and the benefits of it to the company and its employees. We are currently in discussions within the company regarding a formal programme, given that mentorship currently occurs informally as a matter of course, as it did with Wendy. I have no doubt that a number of companies already have some kind of mentorship underway. I would be delighted to see us sharing best practice with each other, all with the view of uplifting the financial planning profession as a whole. The Financial Planning Institute (FPI) has recognised the value of mentorship in cultivating the next generation of qualified financial planners, and runs the FPI Mentorship Programme. If you are interested in finding out more about the programme or how your organisation can be recognised as an FPI Mentorship Centre, contact certification@fpi.co.za.
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PRACTICE MANAGEMENT
Guide to
starting a pr The Financial Planning Institute (FPI) has recently launched a Guide to starting a financial planning practice. The guide, which comprises of the templates and guidelines, is meant to assist members in making sure that the process of starting a practice is simplified.
The required standard of professionalism A professional is known by four hallmarks: Education, Examination, Experience and Ethical Behaviour. Since 2011, FISA has offered an annual examination that allows the successful candidate to apply for the Fiduciary Practitioner of SA (FPSA®) designation. Furthermore, our education partner, the Unversity of the Free State, is introducing a programme in fiduciary practice from 2015. FISA has a strong Code of Ethics, as well as a Continuing Professional Development programme. Our strong reputation has led to: • Increased awarenes of fiduciary matters in the media • Clients demanding to deal only with FISA members • The authorities consulting us on industry issues • Members experiencing a promotion of their interests
ESTATE PLANNING | TRUSTS | WILLS | ESTATES | BENEFICIARY FUNDS
www.fidsa.org.za
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actice 1 2 3 4 5 6
RYNO Pays a packet for risk insurance as a smoker.
Business bank account It is important to keep the assets of your business and your personal assets separate, therefore, it is vital that your business bank account be opened.
Business insurance and professional indemnity insurance Having the requisite insurance policies for your business is vital. It will protect the business against unforeseen events that could have a negative impact on the running of the business.
Contract of engagement template The document confirms the obligations agreed upon by each party at the initial consultation.
Elements to consider when starting a financial planning practice There are many reasons for why one would like to start their own practice. However, no matter the ultimate reason, there are certain aspects to consider in determining your value proposition.
FAIS Compliance and Risk Management An FSP (Financial Services Provider) needs to obtain a license if they will be rendering advice or intermediary services in terms of the FAIS Act. An individual carrying out the functions of an FSP needs to be authorised by the Registrar to act in that capacity. .
Financial planning practice business structure and tax implications. The registration of your financial services practice (FSP) as a private company comes with some benefits. There are tax incentives, limited liability and it allows for business continuity. In addition to the guide, FPI has put together a few templates which will assist financial planners in adhering to good practice.
In addition to the guide, FPI has put together a few templates which will assist financial planners in adhering to good practice. 1. Investment policy statement guidelines The guideline includes elements that one would need to consider when drawing up an investment policy statement for individuals or institutional investors. 2. Due diligence framework: a guide on selecting a service provider As with any processes to selecting a service provider, a proper due diligence must be followed prior to investing a client’s money with the appointed provider. This reduces the risk for both the financial planner and client. To access all the above templates and guidelines, visit www.fpi.co.za. For more information on these new guides, please email technical@fpi.co.za.
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REGULATION
Responses to
document RDR start to formulate
By Christy van der Merwe
S
outh Africa’s financial planners have largely welcomed the release of the Retail Distribution Review (RDR) discussion document, which was released by the Financial Services Board (FSB) on 7 November. Now begins the serious scrutiny of the long-awaited document and the formulation of responses required by March 2015.
release of the RDR paper for some time now and we welcome this opportunity to collaborate with the regulator and industry stakeholders to steer the financial planning profession into the very important next phase of its development in South Africa.”
Adv. Gerhardt Meyer, CFP®, FPI board member and chairperson of FPI’s Advocacy Committee says, “FPI has been looking forward to the
“The Institute, in particular, welcomes the references to financial planning, as contained in the paper. We have been engaging with
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FSB and National Treasury over a few years to work on the concept of regulatory recognition for the profession and the concept of financial planning, and are very excited about this opportunity to further engage on this topic,” continues Meyer.
Initial reactions “We anticipate mixed reactions in the market,” Anthony Smith, head of the KPMG Financial Services Regulatory Centre of Excellence tells The Financial Planner.
Smith and Lyndall Hobson, Financial Services Insurance manager at KPMG explain that knowledge gained from the UK RDR model showed that after a year of implementation, financial advisors managed to change their business models to adapt. A survey done in UK indicated that 88 percent of customers were satisfied with changes made to remuneration models. “We are confident that there will be a similar reaction in South Africa. However, the cost outlay for advisors and insurers in terms of systems and processes has not come at an opportune time,” say Smith and Hobson.Indeed, the costs of compliance to the myriad of new financial services regulation in South Africa, particularly in the current tough market conditions, are a major concern for intermediaries. The current public comment period is the time for advisors to have a say in shaping the regulation, which will in turn shape the way business is done going forward. Smith and Hobson note that for certain players that have established compliance departments and resources which are able to understand the implications of such regulation to their business models, the comment period is sufficient. However, for the smaller industry players who are currently facing a myriad of regulatory changes, RDR may not receive sufficient attention.
Distribution channels There are some early signs of unhappiness from various sectors with regards to the proposed caps on insurance binder fees payable to multi-tied intermediaries (binder holders) per binder activity. A precursory viewing of the document suggests that the FSB has been mindful of the requirement for differentiated fee structures on products that are marketed to low-income consumers. It is also clear that the FSB will level the playing field between adviser and product supplier in ensuring fair outcomes for consumers. As well as the Treating Customers Fairly (TCF) legislation, RDR places more responsibility on the product suppliers to ensure delivery of fair customer outcomes, we expect that product suppliers will need to consider their current distribution channels and whether these remain appropriate. We expect that there will be more of a focus on the quality of distribution channels used, explain Smith and Hobson. There are numerous proposals contained in the RDR aimed at revising intermediary remuneration. FPI chairperson-elect, David Kop, explains that, upon initial reading of the RDR discussion document, it appears that fees will remain uncapped, however there may be commission bans and changes to commission structures. The RDR proposes far-reaching
reforms to the regulatory framework for distributing retail financial products to local consumers, and are aimed at addressing poor customer outcomes in the current system. The experts at KPMG note that the environment may become challenging for the smaller players as their remuneration structures may be less lucrative as a result of commission scales being regulated. “Intermediaries with limited diversification in their current portfolios may be affected more than others.”
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Product suppliers “We may see a reinvention of products and a potential decrease in the appetite to sell lowerend products that are not lucrative in terms of earnings,” note Smith and Hobson. They add that this will result in product suppliers being more innovative in product design. Kop notes that this has been recognised in the RDR discussion document, and proposals have been made to deal with the lower end, however, these are more on the product side than the advice side. Due to proposed changes in remuneration to intermediaries, products may be structured differently to encourage intermediaries to sell the products. Overall, the market has anticipated many of the changes put forward in the RDR discussion document. Only on further investigation and practical application will one be able to see whether there are any unexpected challenges, say Smith and Hobson.
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“One will only be able to truly evaluate any unintended consequences once the proposals emanating from the RDR become effective. Unintended consequences may not impact the market as a whole but may rather impact specific products working through specific distribution channels. These consequences may only be realised once entities consider the impact of RDR on their individual business models,” conclude Smith and Hobson. FPI will put together a comprehensive response to the RDR paper by the due date of March 2015 and encourages its members to read through the paper and direct comments to technical@fpi.co.za anytime during this comment window. The Institute will be collating and reviewing all comments received and put out a draft commentary paper for further input.
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TAX PLANNING
Carla Letchman, Competency Specialist at the Financial Planning Institute
Tax-free savings accounts A definite factor financial planners need to take account of when doing a client’s financial plan
S
outh Africans have a particularly bad savings record in comparison with other developing nations. This is an aspect that the government has taken cognisance of and has, therefore, led to the development of savings incentives. The concept of tax-preferred accounts was first mentioned in the 2012 Budget Review and later that year a discussion document was published entitled, Incentivising nonretirement savings.
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Earlier this year a paper entitled Nonretirement savings: Tax free savings account (‘the discussion document’) was published which comprised of responses to the initial discussion document published in 2012 and further laid out the foundation for implementation. The draft Taxation Laws Amendment Bill 2014, also made reference to the tax free savings accounts and more recently the revised draft Taxation Laws Amendment Bill clarifies a few questions and sets forth an implementation date, 1 March 2015.
The focus of this article is on the characteristics of the savings accounts and more particularly what financial planners need to note when drawing up a financial plan or advising a client on investments going forward. One of the key elements that was retained is the continued existence of the interest exemption. This means that an individual would not have to transfer their existing investments to a savings account in order to qualify for any tax exemption on the interest earned. The retention is in essence
a transitional arrangement and the interest exemption will not be adjusted, upon implementation of the tax-free savings accounts in 2015, annually to account for inflation and, therefore, over time the benefit would erode.
Reinvested amounts will be allowed provided they are not in excess of the annual limit. An individual will be allowed to open multiple tax-free savings accounts per annum. Each account may have interest bearing investments or equity products or both.
The annual contribution limit remains the same at R30 000, this is despite requests from certain stakeholders that the limit be increased. National Treasury did, however, note in their response paper that they would consider greater annual limits for people who are 65 years and older in years to come. This limit was implemented to encourage saving timeously in order to reap the rewards in a given timeframe. It in essence encourages an individual not to procrastinate. The annual limits will be adjusted accordingly to take account of inflation.
National Treasury released a draft Regulation in mid-November 2014 for comment. Further, a notice was published together with the draft Regulation, ‘Notice: Publication of proposed notice in terms of section 12T of the Income Tax Act, 1962, in respect of persons or entities that may administer financial instruments as tax free investments.’ The section defines a ‘tax-free investment’ as being a savings product, financial instrument or policy. In terms of section 12T of the Income Tax Act, the following persons or entities may administer financial instruments as a tax-free investment: • A bank; • A long-term insurer; • A manager as defined in section 1 of the Collective Investment Schemes Act 52 of 2002; • Government; • An authorised user as defined in section 1 of the Financial Markets Act 19 of 2012;
The lifetime limit, however, will not be increased to take account of inflation in the short term. This is to ensure that the fiscus will not be detrimentally affected by the tax reliefs. The lifetime limit is R500 000. The limits do not take account of earnings, it merely refers to contributions made. Amounts invested in these vehicles that are in excess of the annual limit will be taxed at 40 percent.
• An administrative Financial Services Provider (FSP) as defined in board notice 79 of 2003 issued in terms of section 15(1) of the Financial Advisory and Intermediary Services Act (FAIS) 37 of 2002. The products qualifying as tax-free savings and investments should be simple to understand, transparent (with disclosures) and suitable for the majority of individuals making use of the savings and/or investments. The regulation does allow for transfers of the full value or a portion thereof from one service provider to another, provided the service providers can facilitate the transfer amongst other requirements. Investments that expose the investor to excessive levels of risk are excluded from being considered tax-free investments. The investment also has to be liquid; individuals must be able to access their monies within seven business days upon request. Products with performance fees will also not qualify. In order to ascertain the suitability of the product, an individual should have a customised financial plan. It is in essence the task of the financial planner to make sure that the product is suitable taking into account the client’s individual circumstances. It is envisaged that the financial planner play a key role.
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tegHnology
Social media policies prevent abuse of
workplace technology By Christy van der Merwe
employees’ communications when using the employer’s work tools,” says Wilson.
C
ompanies that are seeking to embrace the benefits of modern technology including computers, smart phones and tablets should implement employment policies that clearly outline and regulate what employees may and may not do with the work tools provided to them. “Given the potential for abuse and confusion, the increasing use of technology in the workplace has necessitated that employers implement policies which clearly regulate behaviour,” says Shelley Wilson, partner at corporate law firm Bowman Gilfillan. “One of the ways of ensuring that work tools are only used for work-related purposes is to include a clause in employees’ contracts informing them that they should not have an expectation of privacy, and that the employer has the right to monitor their use of the work tools provided to them, including accessing communications,” she adds.
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Employees may be less likely to conduct personal activities during working hours if they know that their employer may at any time monitor their usage of work tools and intercept electronic communications. Although section 2 of the Regulation of Interception of Communication Related Information Act of 2002 provides that an employer may not intentionally intercept an employee’s e-mail, exceptions to the general prohibition are contained in sections 5 and 6 of the Act.
Similarly, the most effective way to manage employees’ use of social media websites like Facebook and Twitter would be in terms of their contracts of employment or a social media policy that regulates the use of social media sites during working hours, irrespective of whether or not they are using the company’s property to gain access to these platforms. One of the most commonly used methods of managing employees’ use of social media platforms during working hours is to block access to these platforms when using the company’s equipment.
Section 5 is the most important as it allows the interception of communication with the consent of the party to that communication.
“Outside of working hours, the more important question is in relation to the content that is posted by employees,” says Steven Adams, associate at Bowman Gilfillan.
“For this reason, it is important that employers ensure that their contracts of employment or Internet and email policy contain provisions that inform employees that they should not have an expectation of privacy in relation to their use of employerprovided resources, and that the employer has the necessary consent to intercept
“If the content of statements made is defamatory or has the potential to bring the employer’s name into disrepute, the employer would be within its rights to take disciplinary action against the employee. Ultimately, the employer would have to make an assessment on whether or not the content transgresses its code of conduct and warrants disciplinary action.”
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