The Financial Planner | Issue 34 (3 of 2014) by Sibongile Mdluli

Issue 34 (3 of 2014) | R30.00 (incl.VAT)

‘Trust that is earned’ Meet Peter Hewett, CFP® 2014 FPI Financial Planner of the Year

Official journal of the Financial Planning Institute of Southern Africa

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Contents 4

Letter from FPI

FPI Award winners

Peter Hewett, CFP® Donovan Adams, CFP® Bruce Fleming, CFP®

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Alan McCulloch, CFP® Gerald Mwandiambira, CFP® Jacques Hodsdon, CFP®

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Revised financial statements for retirement funds 2014 – What you need to know

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44 Marketing your practice in difficult times 46

Good practice management and sales – a continued tug of war

Being financially fit and proper – what is required

Planning for plan-B

Regulation

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South African financial planning: abreast of the best

Tax pLANNING

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Nowhere to hide – changes to tax agreements to permit the collection of tax

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Letter from FPI

As I pass on

my baton his year marks the 10th anniversary of the Financial Planning Institute (FPI) as a section 21 not-for-profit company, governed by a Board of Directors. I have had the privilege of serving on this board since its inception and what an amazing journey it has been!

and dedicated team. My undying gratitude goes to the amazing people at the FPI office, for whom no task is too big. To quote Sir Isaac Newton, if I have seen and done more, it is only because I have stood on the shoulders of the giants that make up the team at the FPI office.

As I reflect over the last 10 years, I see an organisation that has achieved so much more than it had set out to do in 2004, true to the goals set by the courageous leaders of the Institute of Life and Pension Advisers way back in 1981. Our recognition by the South African Qualifications Authority (SAQA) as a professional body for financial planners in 2012 must surely rank as the highlight of our achievements. This achievement ensures that members, predominantly CFP® professionals can hold their heads high, secure in the knowledge that they have a credible and recognised professional body that they are accountable to.

As I take my leave of the FPI board, I would like to say thank you to everyone that has worked with us, in particular SAQA, The Financial Services Board (FSB), FPSB, South African Savings Institute (SASI), the Financial Intermediaries Association (FIA) and every other individual and organisation that we have had the privilege of working with. I take this opportunity to thank all past directors; these individuals have served FPI with distinction. I would also like to salute them for the vast contributions they’ve made towards our success. I would further like to single out our former CEO, John Arnesen who made my work so much easier during my first term as chairperson.

Our affiliation to Financial Planning Standards Board (FPSB), owner of the CFP® designation outside the United States, granting us the sole licence to CFP® certification in Southern Africa, makes us one of only 24 other countries with this privilege; a privilege that comes with rigorous standards that we comply with. Our most recent assessment in 2012 by FPSB resulted in us obtaining the highest score of all 24 affiliates for delivery of the CFP® certification programme.

So having said this, I have pleasure in handing over the baton to Sankie Morata, CFP®. Sankie takes over the reigns as FPI Chairperson for the next two years. Working with Sankie has been a pleasure, not only over the last two years but since his appointment to the board. I would also like to take this opportunity to introduce Ntai Phoofolo, CFP®, who succeeds Sankie as Chairperson-Elect. I have no doubt that these two distinguished gentlemen, together with the Board of Directors, will lead our institute with distinction and passion and that FPI will continue to make great strides under their leadership. (See page 6 for the Board of Directors).

The financial services arena continues to change, Treating Customers Fairly (TCF) and the forthcoming implementation of the Twin Peaks Legislation will further ensure that consumers are protected within a comprehensive financial environment. The changes in both the savings and retirement landscape are gaining momentum, and we excitedly await the release of the discussion document from National Treasury. Likewise, these changes present untold opportunities for ethical financial planners who believe in putting clients first. In turning my attention to the people that make everything happen at the FPI office, I salute the CEO, Godfrey Nti and his hardworking

So as I ride off into the sunset, I do so with the satisfaction that I have served FPI as best I could, and I take with me the memories of all the amazing people I was privileged to meet and work with. My work here is done.

Prem Govender, CFP ® Former FPI Chairperson

life insurance

Going for Peter Hewett, CFP速

Donovan Adams, CFP速

Bruce Fleming, CFP速

In this issue, we profile inspiring CFP® professionals who were also the recipients of the prestigious awards that were announced at this year’s FPI Professionals Convention. The Financial Planning Institute (FPI) is committed to recognising excellence in the financial planning industry and awarding those for their outstanding achievements in a number of categories. The most recognised annual award is the coveted FPI Financial Planner of the Year title. In addition, FPI introduced the Harry Brews’ Award (then Chairman’s Award) in 2010 and in 2011, the Media Award. The institute also recognises the Top Student in the FPI Professional Competency Examinations. We would like to give recognition to this group of impeccable brand ambassadors of the CFP® designation. We are excited about their career achievements and hope their perspective on life and business provides an insightful read.

gold Alan McCulloch, CFP®

Gerald Mwandiambira, CFP®

Jacques Hodsdon, CFP®

2014 FPI Financial Planner of the Year

Peter ® Hewett,CFP Managing Director at Efficient Advise

Why did you enter the FPI Financial Planner of the Year competition? Looking at all of the industry bodies, there are none that represent the financial planning industry to the extent that the Financial Planning Institute (FPI) does. I regard my CFP® designation as the pinnacle of the industry that recognises and supports the business I am trying to build, and the Financial Planner of the Year Award as the highest accolade I can obtain as a

representative of the professional financial planning industry. I believe that FPI, over the last number of years, has done a lot to raise the profile of FPI and the CFP® designation at an industry level and in the eyes of the general public. I am honoured to have been selected and I look forward to working with FPI in advocating the values of the organisation on behalf of my profession and ensuring that we drive consumer financial literacy across South Africa.

What do you think the judges looked for when selecting a winner? I believe the judging criterion is founded on industry standards relating to overall financial-planning expertise and the quality of products and services a client can expect to receive from a financial planner. The evaluation process entails a fullyfledged due diligence of a financial planner’s business with an in-depth scrutiny

of his or her professional competence, technical skill, quality of recommendations, quality of processes, and client management methodology applied – all within the framework of treating clients fairly. The financial services industry represents one of the most dynamic sectors in our economy and I believe that the key to success of any financial planner is his or her ability to be innovative, to continually develop industry knowledge and technical expertise and to focus on building long-term relationships with his or her clients’ with a genuine commitment to achieving their goals and aspirations.

Where do great ideas come from at Efficient Advise? To understand the financial challenges our clients face, we never stop listening to them and therefore our clients are undoubtedly our greatest source of new ideas, continuously culminating in new or enhanced services and products. However, our culture is very entrepreneurial, and I have learned that employees can generate great ideas if you let them. I believe in empowering people to contribute and continuously promote participation and the sharing of knowledge, ideas and achievements at all levels within our company.

Tell us about the exciting plans you have for the future

year, before taking into account a recent significant acquisition. However, we don’t only associate growth with higher revenue; we are also extremely proud of the employment opportunities that this growth has created. We regard the people who work for us as our greatest assets and appreciate their commitment and energy. The expansion of Efficient Advise has enabled us to create employment for 138 people this far. Moving forward Our vision is to become the largest, most aspirational and sustainable, totally independent financial services provider in Southern Africa in the eyes of the financial advisory industry, private clients, small business and regulatory authorities. Key developments over the next three to five years include growing our financial advisor base to around 200 representatives nationwide. We have created what we call the Efficient Experience, a proprietary competency model to standardise and regulate client engagement with our accredited financial advisors. Simultaneously we are planning to establish the Efficient Academy, an online training and examination module per product and licence category, in support of the continuous professional development of our financial advisor base.

Let’s elaborate on what Efficient Advise is doing to improve client trust The Efficient group of companies present clients with a trusted brand. Our representatives are bound to adhere to our code of conduct which was developed to ensure the protection of our client’s interests and the integrity of our brand and our representatives. We drive consumer education and client engagement endeavours via client presentations to diversified audiences including farming communities, schools, professionals and charitable organisations, daily and monthly newsletters, social media campaigns and videos. For the second year in a row we are the main sponsor of the Gauteng Investment and Retirement Expo in October. In 2013 Efficient Advise became one of the first recipients of the FPI Approved Professional Practice™ accreditation – one of only eight such practices in South Africa. This designation not only endorses the company’s commitment to service delivery of the highest possible standards but also creates the assurance that the quality of service we offer is not dependent on single individuals. Regardless of the financial advisor clients

Looking back Efficient Advise was formed from the acquisition of a small Cape Town-based financial planning practice. The business only offered a limited value proposition to the clients it was introduced to via a referral agreement with an accounting firm. After the merger with Efficient, we implemented a structured growth plan, which incorporated an enhanced value proposition with an extensive distribution capability. The operations infrastructure originated from the development of our initial branch network and since then, we have expanded our geographical footprint across South Africa. Our infrastructure is geared for growth, and we have exponentially increased our staff compliment in the last five years from one to 81 advisors. As a result of this growth, we have also created our own customer relations management and financial needs analysis system. When we started five years ago our revenue was just under R5 million, and it has escalated to approximately R42 million this

deal with at Efficient Advise, they will always enjoy the same high standards of professionalism and expertise. Another strength that differentiates us from other advisory practices is that we have a product committee and an investment committee. This ensures that any product that we offer through Efficient Advise follows a stringent approval process with proper diligence before we present it to any client.

Your brand has certainly been more visible and your strategy is to be more prominent in the media. What have been the benefits of implementing this decision? A company cannot exist without brand recognition, and presenting Efficient on a variety of media platforms has certainly raised our credibility. Not only have we become a viable financial services partner for new clients, but it has also provided a welcome boost for our recruitment drive, with financial advisors now approaching us to join our company. An additional benefit, of course, is the significant level of client growth that we have experienced in the last few years, which has enabled us to develop a meaningful and financially sustainable value proposition.

Name one challenge our industry faces and how you think the problem should be handled? Although the industry is gradually professionalising, I believe that we still have a fair amount of work to do to build a prevalent reputation for our profession, like the medical or accounting professions. It is critical that the regulatory authorities and industry bodies, such as FPI, continue to raise the standards required to operate in the financial planning and advisory industry as this is the only way that the industry will ultimately become sustainable and be recognised as a career path of choice.

What do you believe is the most rewarding aspect of your career? Building and growing Efficient Advise – it has been a challenging but incredibly rewarding endeavour and has been achieved with a team of amazingly talented and committed people.

What do you think are the three virtues that every leader should possess? • Empathy – great leaders are able to connect with the needs of others. • Introspection – you need to be honest with yourself and even self-critical at

times because it is easy to become arrogant. It is important to remember that most successes in life are a team effort and cannot be achieved alone. • Being a lifelong learner – having a genuine interest in what you do. You need to remain technically astute in the field in which you operate and must stay abreast of any industry changes. I have an insatiable appetite for knowledge and am always learning something new or looking for new ways to do things. At the moment I am also pursuing other academic designations relevant to my field.

How do you strike a balance between work and home life? Building a business and managing family time can be challenging – no matter how many hours you’re working now, you will inevitably have to work smarter as the business grows, if you want to ensure a healthy balance between business and personal matters. I am hoping to achieve this balance one day, but I am very fortunate to have the support of my wife Erika, who has been at my side for 24 years, as well as the support of my two boys Ashley and Andrew. We ensure that we spend quality family time together over weekends and truly enjoy nature – so the bushveld rates very high on our list of favourite places to visit.

Become an FPI Approved Professional PracticeTM and stand out as a role model for ﬁnancial planning in your community.

As an FPI Approved Professional PracticeTM, your business would be distinguished as a professional financial planning practice offering financial services of the highest standard. If your core business is financial planning, and you have a minimum of four full time financial planners or advisors, then send an e-mail to membership@fpi.co.za and use ‘Professional Practice’ in the subject line.

Contact us on 086 1000 FPI (374) or visit www.fpi.co.za CFP®, CERTIFIED FINANCIAL PLANNER® and are trademarks owned outside the U.S. by Financial Planning Standards Board Ltd. The FPI is the marks licensing authority for the CFP marks in South Africa through agreement with FPSB. Terms & Conditions apply.

FPI Financial Planner of the Year first runner-up

Donovan Adams, CFP® Retirement Specialist at Chartered Wealth Solutions

Why did you enter the FPI Financial Planner of the Year competition? Although I had prior experience in our industry, I only embarked seriously on my professional financial planning career in 2008 when I enrolled for and completed my Postgraduate Diploma in Financial Planning. That was the year that I first learnt of the competition and it just so happened that John Campbell, CFP® (Chartered Wealth CEO) won. It became my goal to aspire to that level, and I strongly encourage all planners to do the same. The value I gained from being assessed and critiqued by industry experts and my peers is immeasurable.

What is the culture at Chartered Wealth? At Chartered, we understand that establishing and maintaining the right culture is key to everything we do in our business. Our company culture centres around giving clients the best possible financial planning experience. This does not simply happen on its own. We go to great lengths to ensure that we hire the right people – people that align with our vision and are excited about contributing to and growing the Chartered brand, culture, values and philosophy. So the culture is very much about our

people and challenging the status quo. We champion thought leadership and innovation in our industry and get excited about assisting clients to get the most out of their lives in retirement.

How do you win your clients’ trust? I believe that a client makes a conscious or unconscious decision within 10 seconds of meeting you whether they trust you or not. So it’s vital that your first impression be a good one! I’m amazed at some of my peers in the industry who want to be regarded as professional yet dress in jeans and old golf shirts. But more

importantly, the client can sense whether you are genuine or not and whether you are acting in their best interest. If you are, then gaining a client’s buy-in and trust will happen naturally. As CFP® professionals, we understand that our client’s trust is sacrosanct and that mutual trust is the foundation for any healthy relationship. In addition, you also need to be able to trust your client. If not, then it’s best that you walk away – the earlier the better.

How do you deal with clients who have an aggressive nature? I am not aggressive by nature and generally try to avoid conflict. So if a new client is overly aggressive or threatening then we’re probably not going to be a good fit. If an existing client is being aggressive, I always show them the utmost respect and listen really well so that they feel heard. I will then do everything in my power to rectify the situation if possible.

Tell us about your personal involvement in mentorship? We have a great mentorship programme in place at Chartered and it forms an important part of the culture of our business. We are all encouraged to share and learn from each other, and that is very healthy and exciting. Wendy Phaka is a great example of the mentorship culture in our business. She joined us in 2011 as the tea lady to stand in for her aunt who was on maternity leave. Wendy exuded confidence and just bubbled with personality and energy. When she delivered tea and coffee, it was so refreshing because I could tell she took pride in her work and carried out her duties with passion. She greeted with a smile and engaged everyone in the room. Wendy expressed a desire to become an administrator in the business and so her career path began. Wendy is a bright young woman who had a qualification; she just needed an opportunity. Wendy was allocated to my team where we immediately began developing her strengths and sought to improve on her weak areas. She began training and was introduced to the body of knowledge concerning investments and insurance; however, it was also very important for us to improve her pronunciation. I felt that I could make a difference.

The training was simple: Wendy and I scheduled an hour every Friday. She picked out a book, read to me and where necessary, I would correct her. Now Wendy is a vital part of our administration team.

see, emails to answer, plans to write and phone calls to make. So you have to be strategic and work smarter, not harder. I have a brilliant support team and I rely heavily on them.

We also have a fantastic financial planner mentorship programme. We recruit young graduates who are fresh out of university armed with book knowledge, and we provide a solid landing place.

I have also always made it a point never to take work home. When I leave the office I am able to switch off and then enjoy being at home with my beautiful wife, Tracey, and newborn daughter, Jennifer.

They are given the opportunity to gradually learn about the practical side of the business and participate in meetings so that we really develop people and give them the opportunity to soar.

I make sure I keep fit by running during the week and playing a game of squash or golf on weekends. My creative outlets are cooking, playing the piano, songwriting and, more recently, I resumed woodwork which I really enjoy. With a baby in the house now, finding balance is that much more of a challenge.

What do you think clients value most about Chartered Wealth? Clients have often told me that they really appreciate the care and professionalism that they receive from us. We believe that retiring successfully is not just about having enough money, but rather living a life that is balanced and truly rewarding. A vital part of our company culture is making clients feel part of the Chartered family. One of the ways we do this is by hosting various events and inviting guest speakers on many different and interesting topics throughout the year.

How do you deal with the pressures that come with your role? It’s easy to fall into the trap of working too hard: there are always clients to

What is your favourite part of your working day? Going home to my baby girl! On a serious note, I really enjoy my client meetings, I normally schedule two client meetings in the morning and one in the afternoon. I also try to schedule client meetings from a Tuesday to Thursday so that it allows me to write plans and catch up on admin on a Monday and Friday.

Please share something about yourself that people don’t readily know I enjoy wood turning on my lathe and like making bowls and lamps. Two of the songs that I have written and recorded have made airplay on radio.

FPI Financial Planner of the Year second runner-up

Bruce ® Fleming, CFP Executive Head Private Clients at Consolidated, Western Cape

Why did you decide to enter the FPI Financial Planner of the Year competition? I am a relatively competitive person who strives to be the best at what I do. Entering the FPI Financial Planner of the Year competition assisted me in benchmarking myself with my peers. The other motivation is my willingness

to promote the CFP® designation to the general public, my professional peers and of course the industry. I don’t think my fellow professionals realise the critical role they play in people’s lives. I believe the CFP® mark is the pinnacle of our profession. I believe this credential is worth pursuing and will strongly promote consumers

to seek out the services of CFP® professionals.

As a first-time entrant who has done amazingly well, what do you think the judges were looking for? I believe the three finalists in the competition are very good financial planners. The judges

seem to be looking for a financial planner that is not only an excellent financial planner, but also one that embodies the very reason the Financial Planning Institute exists and what it means to be a CFP® professional.

What is the most profound lesson that you took away from the experience? Entering the competition is not for the faint hearted. Going through the process takes you to a much higher level of understanding of not only what you are doing for your clients but also your business and the financial planning environment. I was forced to do some introspection about the future of our business and the fact that it is future fit. The fact that our business is in a healthy position in a changing industry was a big eye opener.

What prompted the career change from a legal advisor to a financial planner? As a legal advisor, I have come across commission-generated product selling. Brokers were not interested in the client but rather in the selling of products to earn an income. Personally, I entered the financial planning industry to help people achieve their financial goals. We as financial planners are responsible for people’s financial wellness. We are as important as their doctors. Taking into consideration that if a doctor makes a mistake in the operating theatre the patient dies; our role in their lives is just as important because a financial planner who makes a mistake with a clients’ finances who still has 40 years to live, could potentially be a disaster.

industry could benefit from an influx of young professionals. Multi-cultural individuals are needed to serve the South African population. The industry needs to be represented more as it currently lacks transformation. This has not been a target area for many. In line with FPI’s Mentorship Programme, Consolidated has an article planner programme where we recruit young graduates. Under supervision they get to learn the industry without the pressure of productivity. We have had a great amount of success in our article planner programme which has and will continue to benefit our industry. We also approach universities where we talk to students about considering financial planning as a career choice. As a profession that is not as well-known as law, medicine and accountancy, we have taken the initiative in creating awareness of financial planning and the rewards of pursuing the career. Professionalisation of the industry. Consumers have not yet learnt the clear distinction between a CFP® professional and an advisor who does not hold the designation. There is still more work to be done in this area. I commend FPI’s efforts to address the issue however I also feel that members should advocate their designations to consumers as well. I think CFP® professionals should use their CFP® designation with pride. A client of mine was upset when we addressed

him as mister rather than advocate. CFP® professionals should have the same passion about their designation.

What are the three virtues that outstanding leaders should possess? • Compassion – you need to show it by living it. • Lead by example – do what you say. • Be accountable – don’t be scared to make mistakes.

In your opinion what can firms do to improve client’s trust? They need to earn it. I always say there are three kinds of trust; 1. You are not trusted at all. 2. Clients trust you because someone else trusts you. 3. Trust that is earned. You need to understand your clients and have a genuine interest in wanting to help them. Over-delivering and under-promising also goes a long way to earning and cementing trust.

One of your favourite activities is golf, what is it about the sport that you love so much? That is an understatement! I guess I love it because I have not yet mastered it.

It is very rewarding providing clients with the necessary framework and structure to allow them to achieve financial independence.

What do you think are the most pressing challenges facing our industry and how do you think these challenges should be handled? Change in legislation for financial planners and ensuring one is compliant: One needs to be up to date with the developments of the industry; you cannot afford to sit in your cocoon. You need to understand what government is expecting of us, you need to be aware of pending legislation and what this means for you and your career and/or business.

The FPI Financial Planner of the Year Award was presented by the media partner:

The profession does not have enough young professionals joining the industry: I think the

FPI Harry Brews’ Award winner

Allan ® McCulloch, CFP How do you feel to have won the award? Mainly totally surprised and of course very flattered that my long association with ILPA, and latterly FPI has attracted such a high level of recognition. In a sense, it represents the culmination of my career. An added bonus is that I worked with Harry Brews at Liberty over a number of years, and I am sure he would have been just as pleased as I am.

What values have been central throughout your career?

Honesty and integrity are essential elements in a business life if one hopes to be in it for the long haul. Unfortunately, there have been many examples of people trying to wing their way through, and all have inevitably come to a sticky end. In the final analysis it equates to trust, which is a commodity that is hard to earn and very easy to lose. I have tried to be a master of my subject; trying as best as I could to keep abreast of developments and trying to bring some influence to bear where I sincerely believed I could add value.

For me, one unique demonstration of trust associated with FPI is that I would feel comfortable in recommending without hesitation the services of any CFP® professional to advise a client on matters beyond my sphere of knowledge.

What do you think are the most pressing challenges faced by members in our industry? When one sees challenges one often visualises problems – which undoubtedly they often are. Yet challenges inevitably bring opportunity. There is a great deal of

truth in the proverb that every cloud has a silver lining.

was gradually achieving the professional recognition it deserved.

funds (deposit administration) and unitised portfolios just making their debut.

The industry is beset by many challenges but for financial advisors the most important must be the shift from commission-based remuneration to a fee basis. Admittedly it will make it tough for new entrants to come into the industry but ways and means will be found to overcome this stumbling block.

Even though I have been retired now for several years, I have maintained my relationship with FPI with my interest in the whole subject of pensions reform. One of the challenges for retired people is what to do with themselves after a busy life.

It was also a time when word processors were just making their appearance at prices way above the means of the average person; so it all had to be done by hand with scraps of paper stapled to a sheet, crossings out and rewrites looking like a complete dog’s breakfast.

I understand that in the UK, the move to fee-based advice decimated the numbers of intermediaries but that the subsequent recognition by clients of the value provided by true professionals is leading to a general acceptance that times have changed resulting in a slow but steady increase in the ranks. The other immediate challenge - nay opportunity – is the forthcoming implementation of the new tax treatment to be given to retirement fund contributions from March 2015. I don’t think there is a widespread understanding of how this will greatly impact all the carefully constructed financial plans of every client. Neither do I think that the significant opportunities have been properly appreciated. I would strongly urge every financial planner to start work on understanding what is about to happen.

At times professionals evaluate professional membership in a ‘what’s in it for me’ approach. What influenced you to maintain a link with FPI so that you could be of service by using your expertise to the benefit of members and also promote FPI?

One needs to keep the brain ticking over otherwise you end up bored and a great nuisance to your family. Also, retired people have a whole fund of knowledge that can benefit those who are coming into the industry which can be used to prevent endless reinventing of the wheel as well as falling into the same stupid mistakes that were made in the past. At the same time you gradually find other things to do and interests to pursue in retirement so one can gradually drift off to oblivion in a comfortable way.

Looking at your career timeline which significant contribution to FPI stands out for you, if there is one in particular? I suppose that the most significant contribution was the one that caused me the most blood sweat and tears. In the early days there were no textbooks available – only a recommended reading list. So I was asked (read pressurised) to write a handbook on investments and pension funds. Fortunately, there were far fewer options in those days for fund investment than there are today; it was a world of deferred annuities and pure endowments with guaranteed

It took about six months of Sundays to do and then it had to be typed and proofread; after which it had to be sent to the examiner for comment. I think it was the only time that I ever considered leaving the Institute when what I considered to be the definitive treatise on the subject came back covered in red ink. It looked very similar to the resultant mess after your school teacher had ripped your essay to bits. Suffice to say, the changes were made and the volume lasted for a couple of years. I was never paid. I was given the chance to update it a few years later. Money was offered, but there was never enough financial inducement for that.

What family activities do you enjoy the most? The other activity that I have been able to give more attention to in my retirement is my hobby – amateur radio. The Harry Brews’ Award was sponsored by:

As with most things in life, the more effort you put into something, the more you tend to benefit. The hours I spent in committees and as an examiner at one stage reaped really valuable rewards in terms of networking with other professionals, learning of their views and most importantly establishing business relationships with people you trusted and felt comfortable with. Also, very satisfying was to see one’s efforts manifest themselves in a soundly developing and growing institute that

FPI Media Award winner 2014

Gerald ® Mwandiambira, CFP Why do you think you won the award? It was a quite a surprise because I didn’t enter. I am grateful to FPI for recognising my media activities. I personally always seek to advocate the CFP® designation whenever and where ever I make media appearances.

Some CFP® professionals may not see the value of promoting their designation; why was it important for you not only to promote the CFP® designation but to make it a significant part of your brand?

I speak to large audiences who can be highly suspicious, so I use it to establish credibility. When they read my articles or watch the programme I present, I feel the CFP® designation immediately gives me credibility.

So the station took a position to say I may no longer use the CFP® mark after my name, however I can introduce myself as a CERTIFIED FINANCIAL PLANNER® professional on the show.

I am very aware of the power the designation carries. A while ago my producers requested that I no longer use the CFP® mark after my name because they had received many comments from other professionals with designations who appeared on the channel. Apparently in their time of appearance they did not use their designation on the show so when they realised how much I was promoting my designation, they wanted the same. Producers felt viewers would get confused if all presenters used designations.

I also feel that their complaint came from a place of regret. They themselves had not promoted their designation, however, as soon as they learnt that other people were doing it, their own discomfort arose.

According to statistics, there is high financial illiteracy among South Africans. Tell us about the interesting works that you do to address this problem.

I have built a media persona which addresses financial literacy on all LSM (Living Standard Measures) levels. To the lower LSM population I contribute my literary works to a leading women’s magazine in South African called Move. Weekly readership is estimated at 2.2 million. Targeting at mid to higher LSM markets I appear on Business Day TV which has approximately 200 000 viewers a week. On this TV channel, I co-host a programme called the Money Show.

How do you go about advising consumers about the most basic concepts of financial planning? I start with the most basic financial products and then move into the more complex products, allowing them to grow in their literacy levels. The reality is that the audience we service is financially illiterate and the challenge is that they are already in a lot of debt. You may have to first go back in their history and address bad habits and educate them around getting out of debt. Only then do we move on to setting goals thereafter we get to the exciting part of wealth direction. I think that is part of the reason why media is the best way to reach people so that at least you equip them with self-help tools.

What do you think financial planners can do to improve consumer trust? I think financial planners need to be seen on the ground; we are seen as working from glass towers, representing unreachable people and that needs to stop. One way of doing this is also being involved in pro-bono work. For example, the FPI MYMONEY123™ programme is a great way to give back to the community, promote the CFP® designation and also be exposed to a larger audience of people. I think financial product providers also have a key role to play because they are the ones who define the worth of a financial planning professional. CFP® professionals go through stringent certification requirements when achieving their designation, and it’s concerning when someone with minimal or no training writes their RE5 and then immediately starts selling products.

In the next five years do you expect an increase in the number of people seeking advice?

Tell us about the new beginnings that will soon come to realisation in your personal life?

I think we have reached a point where most people are seeking advice but do not know where to find it, so I think that we need to be more visible. At this particular point especially with the level of indebtedness and financial problems, people in South Africa are going through, there is a hunger and need for knowledge, and I see it through the media.

My wife and I are expecting our second child in September, a boy; our first born is a girl, so we are pretty much done now.

How do you ensure growth; are there things that you do or an approach that you identify most with to ensure that you are growing as a professional and as a person? Being prominent in the media allows me to conduct a lot of research for TV and print so I enjoy being exposed to knowledge. I do a lot of my research on the Internet as well as books and also use the FPI website which has a wealth of information.

Why did you pursue the CFP® designation?

What are you looking forward to most in the future, careerwise? Right now I am at a crossroads in my career as I have just come out of having my own practice. My choices are either to go back into the corporate field within management or sales and distribution direction, or I can pursue media opportunities that are linked to financial planning. My extensive Africa experience also presents opportunities; I think where ever I go I want to be in a position where I can promote the CFP® mark and enable others to see it as something of value. In my view, all CFP® professionals should allow themselves to be addressed using the CFP® mark.

The FPI Media Award was sponsored by:

In 2007 I was with the Liberty Group, Liberty encouraged their specialists to take up the designation and paid for it.

Top Student in the CFP速 Professional Competency Examinations

Jacques 速 Hodsdon, CFP Advisor at ABSA Bank How do you feel to have won the Top Student Award? For me it is a great privilege to have won this award. It was never my intention to win any prize or award but rather to prepare in such a way that I could feel comfortable and confident with my knowledge and the subject matter. Whenever I put my mind to something, I fully commit to it and put in the necessary time to succeed. In the end, it benefits me in being an expert in the field and ultimately my clients receive the real benefit. Winning the award has provided me with exposure and given my professional profile

more visibility. I was also featured in two local newspapers in Mpumalanga. I benefited from these features as it created more awareness and trust. My existing clients also feel re-assured to refer clients to the person they have entrusted their own finances and planning with. A number of new clients have contacted me after the news articles. I am confident that I am still to reap the medium to long-term benefits of this accolade.

How did you prepare for the professional competency exam? I have always believed that just effort produces just rewards. While studying towards my CA(SA) qualification, I was used to studying large

volumes of work within a relatively short period of time. These exams also required a lot of applied knowledge rather than marks for theory. This definitely assisted me in preparing for the case study type questions in the Professional Competency Exams (PCE). I applied the same study method for the Postgraduate and PCE and I did not take the exams lightly and ensured that I gave myself sufficient time to prepare. I found that the theoretical knowledge formed the basis of what was being tested thereafter the application was tested, this highlights the importance of having book knowledge

as a base and the experience to assist one tackle the case study. At the back of the post graduate diploma qualification in financial planning, I relied on my summaries and stuck to a proven study method that had worked for me in the past. I believe it is important to do past papers under exam conditions and only to use the answers for marking. That way you train yourself to figure out the solution by applying your knowledge, and in some sense become fit to think. Working with clients, each and every situation requires a differently tailored solution, and the same applies to the exam questions.

Thinking about your academic career, what was your favourite subject or module? I would say taxation. It is understanding the law and applying the law. I prefer subjects that require applications and calculations as opposed to purely theory.

As a qualified CA (SA), what prompted you to make a career change into financial planning? While completing my articles at PricewaterhouseCoopers (PWC), I realised that I would most likely not enjoy making a career as an auditor. I enjoyed the environment and people, and those were some of my best years. After my articles, I went into business with my family and still enjoy being involved in that. Being a CA(SA) exposes one to a very wide area of experience in the business and financial fields. The biggest advantage of this is that you are expected to adapt very quickly to any environment, obtain and understand the knowledge required and apply it effectively. In 2012, my wife and I relocated to the Lowveld, which is when I carefully considered making a long-term career change.

acquiring the post graduate diploma in financial planning qualification? Whether to pursue the designation or not was part of my enquiry when I chose this career path, and people I respect also highly recommended it. From day one when I embarked on this journey, the goal was attaining the designation as soon as possible. Apart from the designation the biggest benefit is the underlying knowledge gained in studying towards it. For me, the designation has allowed me to distinguish myself. My clients also benefit as they are assured that they are dealing with a professional who is willing to abide by a strict code of ethics and also commit to continuous professional development. The other appeal for me was that the designation is globally recognised and is the gold standard of excellence in financial planning. I have also seen the growth in consumer awareness initiatives promoted by FPI. I feel that there is a need for consumers to understand what the CFP® mark represents and the benefits of proper financial planning provided by professionals in the industry. I am currently in the private banking space but enjoy working with business clients as well. What resonates with me is seeing the growth of employers who are recognising the designation. I have noticed that designation holders are highly favoured in terms of employment opportunities or promotions that emerge in the business. As you know, there is a high barrier to entry into the industry. I think the graduate programmes are also a vote of confidence to the designation because young graduates that are fresh out of university are provided employment opportunities and those who aspire to attain the designation are provided with support. I am fortunate to have a great manager who understood the time that I needed to dedicate to my studies. I appreciated his support and that of the company.

Do you plan to study further? The postgraduate and PCE required a lot of commitment. Nonetheless, I continue to participate in continuous professional development programmes. It’s important for me to improve my practice and commit my time towards my clients. I strive to be the best in what I do so it makes sense for me to read a lot and to be up to date with industry developments. I will surely consider studying further and expanding my knowledge in the near future.

Last year Absa recognised you by giving you an award, tell us about it I received an award from ABSA trust for the highest total estate value for all wills drafted and signed in 2013 for the Northern region. Making sure client’s wills are updated, relevant and that it contains their wishes in a practical manner is always my first priority.

What is one thing that we would find surprising to learn about you? If I have time on my hands, I enjoy painting. I have been doing it since university, and it is a good way to relax and clear my mind. The FPI currently runs the said exams four times a year. In order to register for this exam, candidates must have a relevant qualification. For more information with regards to the Professional Competency Examinations, visit the career in financial planning section of the FPI website (www. fpi.co.za) or contact the certification department at certification@fpi.co.za or on 011 470-6000.

The Top Student in the CFP® Professional Competency Examinations was sponsored by:

With her support and after careful consideration, research and consultation with experienced people in the industry I decided to join the financial service industry. The positive impact and value that we can add to clients, their family and other stakeholders was probably the single biggest factor in my decision. My experience in accounting, financial management, taxation and understanding the fundamentals of business has been a great compliment to my decision and to work I do.

Why was it important for you to pursue the CFP® designation beyond

FPI NEWS

FPI partners with Old Mutual Corporate to increase accredited

financial planners and advisors

ccording to the recent global Comparator Research Survey, commissioned by Financial Planning Standards Board (FPSB), 60 percent of firms surveyed in South Africa revealed that the public viewed financial planning as a highly valuable professional offering, and that the financial services industry needed to prioritise increasing accredited financial planners. As the South African household debt averages at around 75 percent disposable income, consumers are becoming more mindful of the impact that proper financial planning has on their finances, and are paying attention to the quality of professional financial advice they seek and receive. Also, with the vast number of financial advisors in the industry representing the financial planning offering, and a large number of South African consumers unable to differentiate between them, many questions

have been raised around the profession’s level of expertise and competency.

Enablement at Old Mutual Corporate.

In aid, the Financial Planning Institute (FPI) announced its corporate partnership with Old Mutual Corporate; an agreement to invest in the training and development of the organisation’s financial planning professionals. “Old Mutual Corporate is proud to be associated with one of the most recognised professional bodies in the financial planning industry, the Financial Planning Institute [FPI]. FPI plays a vital role in the development and professional standard of the financial planning industry. Through this partnership, Old Mutual Corporate, together with FPI, can ensure that its staff is continually being developed professionally, ensure a financiallyempowered society, especially as we help clients to meet their financial and retirement needs at every stage of their lives.”, said Lungile Xaba, Head of

The FPI Corporate Partner™ agreement has been established to raise the competency levels of financial planners and advisors through various up-skilling initiatives. The up-skilling process provides financial planners with pathways towards the CERTIFIED FINANCIAL PLANNER® certification, a designation awarded to financial planners who have met the rigorous certification standards of education, examination, experience and ethics requirements. The institute is committed to widening the financial planning net in South Africa, and this partnership fell well within our strategy of ensuring that we continue to improve access to highly qualified financial planner professionals to all South Africans. The FPI Corporate Partner™ agreement provides an exceptional framework for FPI to work together with larger corporations such as Old Mutual in realising this common shared objective.

Sponsored by:

2014

Annual Financial Planning

Refresher

Open for registration

This annual masterclass, attended by 1200 professionals in 2014, is an event not to be missed this year. Top rated speakers Wessel Oosthuizen, CFP ® and Marius Botha, CFP® will once again leave you with a wealth of knowledge. JOHANNESBURG

11 November

Premier Hotel, Kempton

JOHANNESBURG

12 November

Randburg Towers, Randburg

PRETORIA

13 November

CSIR, Brumeria

WESTERN CAPE

17 November

Bridgeways, Ratanga Junction

WESTERN CAPE

18 November

Garden Court Nelson Mandela

EASTERN CAPE

19 November

The Beach Hotel, Port Elizabeht

KWAZULU-NATAL

20 November

Coastlands on the Ridge, Musgrave

FREE STATE

21 November

Ilanga Estate, Bloemfontein

Earlybird and sponsorship rebate R1250.00 incl. VAT TM

FPI members and FPI Approved Professional Practice members

R1350.00 incl. VAT SAIT and FISA members

Special offer ends two weeks before the event

Normal rate R1350.00 incl. VAT

R1450.00 incl. VAT FISA and SAIT members

R1700.00 incl. VAT Non members

For more information or to register, visit www.fpi.co.za or call 011 470 6058

FPI members and FPI Approved Professional Practice members

FPI NEWS

Road Accident Fund collaborates with the Financial Planning Institute (FPI) to

financially empower claimants

Eugene Watson (RAF CEO) & Godfrey Nti (FPI CEO)

n a recent 2013 report released by the International Transport Forum (ITF), South Africa has one of the highest levels of annual road accidents amongst 36 other global countries. This position is an annual cost of R300 billion to the South African economy in accident financial support claims. The Road Accident Fund (RAF) provides compulsory cover to all users of South African roads, citizens and foreigners, against injuries sustained or death arising from motor vehicle accidents within the borders of South Africa. These lump-sum settlements are often made to claimants who are not financially literate enough to manage their finances in such a way that it sustains their family’s livelihood; particularly as some of the road accident victims may be unable to work again. With this in mind, the Financial Planning

Institute (FPI) and RAF have signed a Memorandum of Understanding (MoU) aimed at providing financial education to RAF claimants in a bid to protect them from mishandling their finances. The partnership entails providing financial literacy tools to RAF claimants through the FPI MYMONEY123™ programme, a financial education community outreach programme that aims to teach South Africans about the basics of personal financial planning to empower them to make sound financial decisions. Furthermore, the MoU provides both organisations with a chance to explore collaborative financial education and advocacy platforms on a national scale. The Institute is proud to be associated with the RAF through their commitment to

financially empower road accident claimants. Their commitment is closely aligned with FPI’s vision, which is to provide financial planning for all South Africans through CERTIFIED FINANCIAL PLANNER® professionals. The RAF saw it fit to collaborate with an independent body that had the ability to provide objective financial planning tools that could empower their claimants to make wiser and sustainable financial decisions for the wellbeing of their families, this is according to RAF Chief Executive Officer, Eugene Watson. Both organisations look forward to a successful partnership that will allow them to jointly change lives by creating financially educated citizens, who through their development can further confirm the importance of financial planning.

For more information, please contact the FPI Legal and Compliance team on (011) 470-6000 or email standards@fpi.co.za.

2014/09/09

However, it later transpired that neither the company nor the leads ever existed. Since then FPI has also received a few queries from more members who were approached by the company concerned as well as others.

FPI cautions its members to ensure that when making use of a lead originator that they are, in fact, who they say they are. This caution comes after members of FPI made payment to a lead originator-company upfront, on the promise of quality leads.

• Are they a registered business? Do they have a verifiable business address and contact details? Consult sources like business directories and internet complaint forums to gather information on the business. • Ask for references from other clients who have made use of their services. • Check that the invoice/quotation you receive is not in favour of an unrelated private person or another company. • If it is too good to be true then walk away.

Infographic Print.pdf

FPI members are advised to be vigilant when making use of a lead originator’s services by making reasonable inquiries:

t has recently come to the attention of the Financial Planning Institute that unauthentic lead originators guarantee appointments for FPI members against payment of fees.

10:10 AM

FPI cautions members against bogus ‘lead-originator’ companies

80% of firms believe that they generate a higher profit

60% of firms believe that they are more productive

80% of firms believe that they generate a higher revenue

80% of firms believe that they have a higher rate of growth of assets under management

4 things firms value most about CERTIFIED FINANCIAL PLANNER® professionals?

www.fpsb.org | www.fpi.co.za

60% of firms indicate that CFP® professionals have lower compliance and legal risks compared to those who are not certified.

In 12 months, 60% of firms expect an increase in the number of people seeking advice from financial planners.

1 80% of firms indicated that employing CFP® professionals had a positive impact on clients satisfaction with the firm and led to increased client retention. 2 60% of firms identified a growing demand for high net worth clients to be serviced by a CFP® professional.

CFP® certification and client retention

80% of firms believed that 80% of CFP® professionals average longer terms of employment compared to advisors who do not hold CFP® certification

80% of firms believed that CFP® professionals have a higher rates of career advancement than those who do not hold the designation

80% of firms viewed CFP® accreditation as favourable when employing financial planners/advisors

CFP® certification and risk avoidance

In 5 years, 60% of firms expect an increase in the number of people seeking advice.

Product/technical knowledge and competencies

Sense of financial well-being

Act in the client’s best interest

Provide a comprehensive picture of the client’s finance

Keep clients on track with their financial and life goals

Create/preserve wealth

When asked to rank 1-5 (with 5 being the highest and 1 the lowest), what firms think clients value from financial planners, the results were as follows:

The CFP® certification’s impact on financial planners’ career progress

Increase the number of credentialed advisors/planners

Manage conflicts of interest

Improve disclosure and transparency

Increase the level of client communication

Place the client’s interests first

5 things firms should do to improve consumer’s trust:

are trademarks owned outside the U.S. The CFP®, CERTIFIED FINANCIAL PLANNER® and by Financial Planning Standards Board Ltd. FPI is the marks licensing authority for the CFP® marks in South Africa through agreement with FPSB.

CFP® certification and public perception

60% of firms saw an increase in business profitability from CFP® professionals, compared to those without CFP® certification

80% of firms indicated that CFP professionals (in general) generate higher levels of revenue than advisors without CFP® certification

CFP® professionals are more productive, according to 60% of firms surveyed

CFP® professionals are more productive and profitable

22% financial planning 22% banking 34% insurance 11% brokerage 11% employee benefit

Research Participation Overview Sector representation:

Global research from Financial Planning Standards Board (FPSB) by Comparator Benchmarking, a wealth management and financial advice-benchmarking organisation, displays the positive impact CERTIFIED FINANCIAL PLANNER® professionals have on South African financial firms and their consumers.

Why firms value CERTIFIED FINANCIAL PLANNER® professionals?

FPI NEWS

Financial Planning Institute announces new Chairperson and new

Board of Directors

The Financial Planning Institute of Southern Africa (FPI) recently announced the appointment of Adv. Sankie Morata, CFP®, as the new chairperson of the Institute for a two year-term. Ntai Phoofolo, CFP®, has also been appointed as chairperson-elect to assist Morata in leading the board.

orata will succeed Prem Govender, CFP®, who stepped down from the board at the end of her term in June 2014. Govender joined the FPI Board in 2004 and served in a number of leadership positions including as chairperson of the FPI Board from 2012 to 2014.

In addition, FPI announced the appointment of a number of new and re-elected members to join the Board of Directors, at the FPI Annual General Meeting held on 24 June 2014 at the Sandton Convention Centre. Newly appointed Gerhardt Meyer, CFP®, legal executive at Old Mutual and former FPI

chairperson, as well as Navin Ramparsad, CFP®, senior legal counsel at Absa join the Board. Re-elected Logie Govender, CFP®, KwaZulu-Natal regional consulting manager at NMG Consulting; Ronald King, CFP®, director at PSG Wealth and David Thomson, CFP®, legal advisor at Sanlam life will resume directorship for the 2014-2016 board term.

Adv. Sankie Morata, CFP®, Chairperson Morata is the head of legal risk and compliance at Nedgroup Trust. He is the current chairperson of the Financial Planning Institute of South Africa. He holds LLB, LLM in mercantile Law and a Postgraduate Diploma in Financial Planning. He is an admitted advocate of the High Court of South Africa, is currently studying towards his Postgraduate Diploma in Compliance Management and holds various certificates in management. In his current role, he deals primarily with fiduciary and tax law, particularly as it pertains to the financial services industry. Morata was a legal advisor of Sanlam distribution academy, fiduciary specialist at BoE Trust as well as regional head for the central region at BoE Trust. He also serves as the chairperson of the developing countries of Financial Planning Standards Board (FPSB). Morata also climbed Mount Kilimanjaro on 19 December 2013. “The FPI Board of Directors’ role is to assess the overall direction and strategy of the business along with the chief executive. The board has a responsibility to develop a governance system for the business, which provides the organisation with a framework for the overall strategy.”

Adv. Ntai Phoofolo, CFP®, Chairperson-Elect Phoofolo is an advocate of the High Court of South Africa who obtained his LLB, LLM (International Law), Postgraduate Diploma in Financial Planning and Advanced Postgraduate Diploma in Financial Planning from the University of the Free State (UFS). Phoofolo recently joined Standard Bank private clients as a relationship manager to their ultra-high net worth clients. He has previously worked as a business development manager at Investment Solutions, also as a legal specialist at Momentum Wealth and specialist legal adviser at Old Mutual. In addition, Phoofolo served as a member of the FPI Disciplinary Committee from 2010 to 2012. “I am highly delighted and honoured by my appointment and look forward to working alongside the Chairperson as well as the FPI leadership team to further grow the status of the institution within the industry.”

Newly elected and re-elected board members are: Adv. Gerhardt Meyer, CFP® Meyer holds a BCom (Law) and LLB degrees from the University of Stellenbosch and is an advocate of the High Court of South Africa. He currently heads up the legal department at Old Mutual’s Retail Affluent Division and was recently appointed as chairperson of the Financial Planning Standards Board’s Regulations Advisory Panel until 2016. Meyer is a past chairperson of the FPI Board of Directors and FPI Tax Industry Sector Group (ISG). He also previously held the position of national president of the Pension Lawyers Association of South Africa. Meyer has extensive experience in all aspects of financial planning, legal advisory and regulatory services. “I’m very pleased to see the continuous progress made by FPI in this regard since I left the board and was very interested to hear that the Institute would now like to even further strengthen this focus. For that reason, I return to the board, with a very specific focus of helping with the further strengthening of FPI’s key relationships with regulatory stakeholders. I trust also that my current position as chairperson of FPSB’s Regulations Advisory Panel would be a useful link to international best practice in this space.”

FPI NEWS

Newly elected and re-elected board members continued: Navin Ramparsad, CFP® Ramparsad holds an LLB degree, a Postgraduate Diploma in Tax Practice, a Postgraduate Diploma in Financial Planning as well as an Advanced Postgraduate Diploma in Financial Planning, specialising in Investment and Portfolio Construction. Ramparsad was previously head of legal at Momentum Wealth and currently serves at executive level within Absa Wealth Investment Management and Insurance. He actively comments on financial planning aspects in the press and financial publications. Ramparsad brings with him 18 years’ experience in all aspects of the financial service value chain, including product provider, distribution channel, sales, legal, strategy and asset management. “It is truly a privilege to serve on the board of the Financial Planning institute and an honour to serve with my fellow board members who have a passion and desire to positively influence the trajectory of the financial planning environment for all stakeholders. I will strive to discharge the responsibility given to me to the best of my ability. ”

Logie Govender, CFP® Govender has served as a volunteer on numerous FPI structures including as a director on FPI Board of Directors (now re-elected), as a member of the FPI Audit Committee and as chairperson of the FPI Remunerations Committee. She has also served as a past chairperson of the FPI KwaZulu-Natal Regional Committee and she is currently the chairperson of the FPI Centre for Professional Development. Govender has in excess of 15 years’ experience and holds an Advanced Postgraduate Diploma in Financial Planning and a BCom in Industrial and Organisational Psychology and Business Economics. She is a regional manager at NMG Retirement Funds. “I’m pleased to be re-elected to the Board of Directors of the Financial Planning Institute and look forward to effectively serving the institute forth going.”

Adv. Ronald King, CFP® King’s engagements with FPI include service as a member of the FPI Board of Directors (now reelected) and the FPI Nominations and Compliance Review Committee. He holds an MPhil in Futures Studies, Advanced Postgraduate Diploma in Financial Planning, a LLM and LLB and is an advocate of the High court of South Africa. King is the author of various publications including Pocket Guide on South African Taxes, Easiguide to Law and Estate Planning, Easiguide to Tax and Investments as well as a Guide to Fiduciary Planning, to name a few. He has over 21 years’ industry experience and is currently the head of technical support services at PSG Konsult LTD. “With my last term as director of the Financial Planning Institute’s board, I hope to continue to assist in building a new vision and future of FPI before handing over to the younger team who has already shown their enthusiasm and skill.”

David Thomson, CFP® Thomson’s volunteer engagements with FPI include service as a member of the FPI Board of Directors (now re-elected), FPI’s KZN Regional Committee member, chairperson of the FPI Estates and Trusts Industry Sector Group (ISG) and technical director of the FPI Technical Committee. In addition to BA, LLB and an Advanced Postgraduate Diploma in Financial Planning, he also holds postgraduate qualifications in Tax, Compliance Management and Arbitration Law. Thomson has in excess of 24 years’ industry experience and is a legal advisor at Sanlam Life – broker distribution services. “It is with great pleasure that I was re-elected by the members to serve as a board member for the only professional independent financial planning body in South Africa. My initial busy two-year term passed by quickly as FPI continued to raise its profile and offer more services to members. I am glad to be given an opportunity to continue to work on strategies that we have started to implement. As we heard at the recent FPI Professionals Convention: the more you put in, the more you get out.”

Nick & Barry {00043}

balance is everything, in life and investing.

In our experience, the key to successful investing is getting the balance of your portfolio right, then taking a long-term view on it. To do this, you need a team on the ground. Preferably one obsessed with weighing up risks and rewards in every market, so they can allocate your funds in the best combination of bonds, cash, equities and property, both locally and globally. This is where our multi-asset and flexible fundsâ&#x20AC;&#x2122; management team distinguishes themselves. Theyâ&#x20AC;&#x2122;re standing by to create a perfectly balanced portfolio. 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

client clientengagement engagement

heart Touching the

of your client At the recent FPI Professionals Convention at the Sandton Convention Centre, Kim Potgieter, CFP®, made a case for the financial planner recognising that his or her client is more than a financial transaction. Using HEART as an acronym, she gave practical pointers to demonstrate value to clients, and make the work of a financial planner more meaningful.

pa thy Aw are Re ness spe ct Tri be

llo

By Kim Potgieter, CFP®| Director at Chartered Wealth Solutions and FPI board member

• Connection Toolbox •

Why bother? I know that most planners have the best interest of their clients at heart. The challenge is to demonstrate this to our clients in a sincere and affirming way. The value for financial planners is that we are making a difference in the world by making a difference in our clients’ lives – we become more valuable to our clients. Instead of having to reduce our fees, we will be seen as an integral part of their lives, not the equivalent of what they can source on the Internet.

A client’s HEARTbeat Life planning has taught us to connect better with our clients. Connecting can be learnt. Our initial meetings with clients used to comprise wonderful presentations of how brilliant we were – and we were disappointed when they did not become our clients. We realised that our financial plans, however good they were, were too generic. The connection toolbox contains practical ways in which we changed, and the results have been rewarding. We as financial planners want to facilitate change in our clients’ lives through their money. Clients no longer see our value as telling them what to do, but rather as embarking on a journey where we help them get not only Return on Investment but also Return on Life. The contents of the Connection Toolbox form the anagram HEART to help us recall them.

The Connection Toolbox Hello

Connection starts the minute a client walks through the door of your office – first impressions really do count. At our company, we have chosen to see clients in our offices – it helps if you want clients to see us as a profession like doctors and accountants. It limits the distraction (no children running around, phones ringing etc.) – you can focus on your client. Do you dress to the same formal degree as your clients? It may seem a small thing, but it shows respect, as does a good coffee, a flower on the tray, a kind phone call to enquire how they are. Be aware of your body language – more than 90 percent of the impression we convey has nothing to do with what we actually say.

People may hear your words, but they feel your attitude. Being truly curious to get to know your client cannot be faked. Showing enthusiasm for what you are doing will help the client feel excited about the process too.

Empathy

“If you talk to a man in the language he understands that goes to his head. If you talk to him in his language, that goes to his heart.” – Nelson Mandela Empathy is our emotional radar. We want our clients to take action, but they won’t do it because we are telling them to, but because we take the time to find out what is important to them and why, rather than making assumptions before the meeting. Search for common ground; we don’t know all the answers – if we are arrogant, clients switch off. When they come into our meetings, they are anxious and feel vulnerable. Take the time to relax and help them feel comfortable. Being present helps you stay engaged – before the meeting, clear your head of your things going on in your life and rid your mind of assumptions.

Awareness

Be authentic – your message must be your own. If you feel uncomfortable, your client will sense it immediately. Your client wants to know you and who you are in order to trust you. Knowing yourself and how you operate is a good place to start. Keep things simple and try not to speak above your clients. Also, help clients feel comfortable and understand their expectations of you. Manage these expectations, as disappointment and complaints from the client will cost you in the long run. To move others, we must be able to see things from their point of view. “Have an understanding so there won’t be a misunderstanding,” says Charles Blair.

Respect your clients

Treat each client as a ‘10’ – connecting really occurs when the other person feels valued. People like people who like them. Use questions effectively – they are the secret to every conversation and helps you fast-track getting to know your client. Questions help us

to talk more about our client than ourselves, and to find out what clients really value. We have found effective questions include: • What is your first money memory? • What lessons about money did you learn growing up? • What previous experiences have you had with financial planners? • If you had all the money you would need, how would you live your life differently? We now have a number of stories about our clients which we can use to write their financial plan in line with their lives. A client is less likely to seek out another planner when they have shared their stories with you. Also, they are more likely to reveal more of their financial position, like assets that they have when they share their stories. You can use their stories anonymously to help other clients who may be facing similar challenges.

Tribe

Creating a sense of community and belonging engenders loyalty in our clients. We can begin to add value in our clients’ lives through functions, newsletters, phone calls, ideas that are not just around money. This makes sure our clients think of us more often – it even gives them more to share with their friends about us. We as planners can embrace the philosophy with each other. Sharing at conferences and writing articles improves the way we all do financial planning. This sharing adds to our feeling proud of our industry, taking it to an even greater level of professionalism.

Conclusion The very definition of a financial planner suggests we make a difference in people’s lives. We are not just gathering information for the sake of it – rather we can go beyond the head connection to the heart connection which is 8000 times stronger. This will ensure that we are truly making a difference and that our profession grows to become indispensable in people’s lives.

EMPLOYEE BENEFITS

Revised financial statements for retirement funds 2014

What you need to know Verwey Wiese | Director at PricewaterhouseCoopers (Financial Services Division)

Following a lengthy consultation process by the Registrar of Pension Funds started during 2011 and 2012 to consolidate the financial statements for the different types of funds into one set of financials, as well as the alignment with the revised Regulation 28, a revised set of financial statements was published on the FSB website during 2013 for comment.

his version was recently gazetted (Board Notice 77 of 2014 of 18 July 2014) and is now applicable to all funds with financial year ends ending on or after 1 June 2014. Funds with year ends ended on or before 31 May 2014 may submit either the old format or the revised new format. But what has changed and how does the new format differ from the previous one? The revision includes certain extra disclosures mainly in the ‘Report of the board of the Fund’, Regulation 28 report and Section 15 agreed upon procedures, as well as major revisions to ‘Schedule IAInvestment Schedule’ and supporting ‘Notes to the Investment Schedule’. Below follows brief highlights of the main changes and added disclosure per prescribed schedule:

SCHEDULE A Regulatory information • New governance note with schedule of trustee meetings held (date and place of each meeting plus confirmation whether a quorum was present or not); and • Provision is made for details of the deputy principal officer, if applicable.

SCHEDULE B Statement of responsibility of the board • New section on ‘Instances of noncompliance’.  Positive statement required that ‘Not aware of instances of non-compliance’ with any acts, legislation, regulations and rules; or  Where there are non-compliance issues, a list must be given in table format of the nature, impact and corrective course of action taken for each instance of non-compliance, distinguishing between cases rectified and not rectified by the date of approval of the financial statements.

•

SCHEDULE C Statement of responsibility by the principal officer • A new requirement to list instances of non-compliance in respect of timeous submissions due in terms of the Act, plus remedial action taken. This would include, for example, late submission of valuation reports, Section 14 certificates, SA Reserve Bank reports, etc. •

SCHEDULE D Report of the independent auditor • The report no longer includes the ‘Report of the Board of the Fund’ in its scope, probably due to the magnitude of extra disclosure requirements that would require verification, as will be clear from the Schedule E-discussion below.

•

SCHEDULE E Report of the board of the fund • Benefits – strategy towards beneficiary benefits (other than strategy for normal members and unclaimed benefits). • Contributions – details of any contribution holidays (period and reserve used). • Rule amendments – statement below the rule table that all rule amendments are

•

available for inspection at the fund’s registered office. (Special rules for umbrella funds need not be listed, but must have same statement). Investments – Investment strategy paragraph required for each of the following:  Individual member choice;  Unclaimed benefits; (as before)  Surplus allocations (as before)  Reserve accounts; (as before)  Settlement income;  Derivative instruments;  Hedge funds;  Private equity funds; and  Securities lending transactions. For the last four items above in particular per item: A statement whether or not the fund utilised such investment instruments;  That exposure did not exceed the Regulation 28 maximum percentage for each instrument;  That a mandate is in place permitting the use of each instrument; and  That monitoring takes place for compliance to both Regulation 28 requirements as well as the board’s investment mandate. It is interesting to note that the previous table requiring a note of the investments held per investment manager has been removed. Membership table – split required between SA citizens and non-SA citizens plus a description of the reasons for any significant movements in membership. Surplus apportionment – A description of the movements in the various applicable surplus accounts (active members, former members, pensioners, employer and member surplus reserves and future surplus) per account (amounts allocated, returns, payments made and remaining balance). Significant matters – A list of specific matters to be disclosed where applicable is now to be provided for each of the following topics:  Settlement income.  Section 14 transfers.  Rules of the fund not complied with. >>

EMPLOYEE BENEFITS

 Insurance premiums in the name of the employer (i.e. all unapproved risk schemes allowed in terms of the fund rules).  Individual funds for defined contribution members included in accumulated funds (e.g. where DB and DC members are not split out on the face of the statement of net assets and funds). • Subsequent events – Again there has to be comment given on the following topics where applicable:  Rule amendments approved after the year end plus impact.  Any changes in investment strategy. It is clear from the above changes that the intention is to hold boards more accountable for governance issues as failure to govern properly will be more clearly visible. By requiring more details on typical high risk or contentious issues, known from past experiences in recent years, the FSB hopes to focus the minds of office bearers. The likely impact would, therefore, be that both the board and principal officer would have to be more pro-active and involved in the drafting of Schedules A, B and E.

SCHEDULES F AND G (‘Statement of net assets and funds’ and ‘Statement of changes in net assets and funds’) remained as before with no significant changes.

SCHEDULE H Notes to the financial statements There have been a few enhancements, but not as major as in the case of Schedule E: • Accounting policies – Derivative policy: to state the reason for using derivatives and to provide reference to the parameters defined in the fund’s investment policy statement. • Related party policy note is being removed • Investment note 2 – table format as before remains, with lines for hedge funds, private equity and derivative market instruments. Unlisted equity must be disclosed separately. • Notes with details of full reconciliation of movements for ‘investments in participating employers’ and ‘investment properties’, are expanded. • Transfers in and out – the top 10 largest transfers must now be listed, with a statement that the complete list is available for inspection. • Unclaimed benefits – the note is expanded to reflect the allocation of tracing, administration and other expenses, to highlight outflows other than benefits paid. • Administration expenses – the note reflects a line for expenses moved to the unclaimed benefits note (thereby in effect reducing active members’ administration expenses). • Financial liabilities – besides the change in name (previously accounts payable), provisions need to be disclosed separately, together with detailed descriptions. • Related parties – details of premium transactions for unapproved risk policies (between the participating employer and the insurer) must be disclosed, including any payables or receivables in respect of the employer. • Surplus improperly utilised receivabledetailed note added (if applicable) with reconciliation of the movement in this balance, including interest raised.

SCHEDULE I Section 15 factual findings report of the auditor • As before, there are separate reports for each fund (large and small retirement funds, umbrella, preservation and retirement annuity funds). Steps have been added in the following areas: Investments • Sample of 10 investment mandates (including 3 largest) to be reviewed for  Compliance with fund investment policy statement.  Securities lending transactions, hedge funds, private equity and derivatives.  Counterparty and collateral requirements adhered to. • Confirm and report scrip lending exposure and collateral. Benefits • Check minimum sample of outstanding benefits to ensure that they should not be classified as unclaimed. Surplus allocations • Seven detailed steps covering active members, former members and pensioners have to be performed where a surplus allocation is applicable. • Two steps were added to address member and employer surplus accounts. • Switches. • To check whether a sample of life stage switches were made within the right time frame. Housing loans • To trace sample of payments and interest charged to loan agreements, and compare the interest rate to the prescribed rate. Transfers • Check minimum sample of individual transfers in and out in addition to section 14 transfers, and check correct unitisation.

• Section 14(8) documentation and 180 day transfer time limit also to be checked in future (for transfers between exempt funds) Previously only section 14(1) documentation and time limit was checked. Reserves • To inspect whether the reserve and other related accounts (e.g. pensioner accounts) held by the Fund and/or reflected in the actuarial valuation are in accordance with the registered rules of the fund. General • Confirm with fund’s GLA risk insurer that the policy had not lapsed and that premiums had been paid to date. • Confirm that fidelity cover extends beyond the period end and report the date to which the fund’s subsequent fidelity insurance cover extends.

SCHEDULE IA Investment Schedule The schedule is enhanced to a 14 column analyses of the underlying fund investments, which reconciles to Schedule IB (Regulation 28). It includes columns for: • Regulation 28 Non –compliant and compliant investments; • Derivative positions; • Foreign Africa and foreign non-Africa investments and; • A reconciling column to Regulation 28 (schedule IB). Besides the normal list of investment categories, there is a line for ‘Investments not disclosed/data not available for disclosure’ which would presumably accommodate

foreign and other investments where the underlying is not known. The aim is clearly that Schedule IA should reconcile 100 percent to Schedule IB going forward. As before, there are detailed ‘Notes to the Investment Schedule’, which have all been reworked in new detailed table format. Completing these tables for multiple segregated managed portfolios will be a challenge, and administrators would be well advised to allow enough time for this task.

SCHEDULE IB Assets held in compliance with Regulation 28 The basic principles of the Regulation 28 report stays the same, with the main change being that Regulation 28 compliant investments (those for which all the required Regulation 28 certificates are available) and Regulation 28 excluded investments (insurance policies) are deducted from total assets before look through is applied. ‘Data not available for disclosure’ may also be excluded. One would hope that this line will not be misused and can expect auditors to take the value being excluded here, into account when concluding their opinion on Regulation 28 compliance. Besides the standard detailed regulation 28 column report, there is an added ‘Investment summary’ table, which appears to mirror the Reserve Bank D427 report per investment category.

CONCLUSION It is clear that all parties involved in the preparation of the financial statements will be affected in one way or another by these changes in the format of the financial statements. In particular there will be more work for: • the principal officer, fund consultant and the board/ finance sub-committee, to assist with preparation of Schedules A to E, • the administrator and fund accountant to coordinate and prepare the Investment Schedules IA and IB (Regulation 28) in the detail required and; • the auditor to perform extra Section 15 procedures on mainly investments, and to check consistency of all the extra disclosed information throughout the financial statements. Retirement fund financial statements have become onerous and more complex to prepare, and the hope remains that more disclosure, both quantitative and qualitative, would enhance member protection.

HEALTHCARE

Gerrit van Niekerk, CFP速| FPI Healthcare Industry Sector Group (ISG) Chairperson

Health insurance products

here to stay! The National Treasury released the Second Draft Demarcation Regulations.

he Draft Demarcation Regulations specified which types of health insurance policies would be permissible under the Long-term Insurance Act, No. 52 of 1998 and Section 70 of the Short-term Insurance Act, No 53 of 1998 and which would be excluded from regulation under the Medical Schemes Act, No. 131 of 1998. The goal of these regulations is the enhancement of the legislative framework relating to demarcation between health insurance policies and medical schemes which facilitate a clear demarcation between what constitutes insurance business (namely, ‘health policies’ and ‘accident and health policies’, in the respective Acts), and what constitutes the business of a medical scheme, in instances where there appears to be uncertainty and ambiguity in the legislative framework. The policies which are not seen as doing the business of a medical scheme, will be excluded from the medical schemes regulatory environment and will be regulated under the Long and Short-term Insurance Act, respectively. The First Draft Demarcation Regulations were published for public comment on 2 March 2012 and the Second Draft Demarcation

Regulations were published on 29 April 2014. The Second Draft Demarcation Regulations make provision for the continued sale of Gap Cover and Hospital Cash Plan insurance within defined product parameters. The Regulations seek to ensure that the design and marketing of health insurance policies do not undermine medical schemes, while at the same time serving the needs of those who require additional protection against health-related risks. The absence of a clear demarcation may result in consumers believing that health insurance policies are a medical scheme and offer the same protection as a medical scheme, when, in fact, the protection is partial and conditional. The Second Draft Demarcation Regulations proposes the following changes to Health Insurance Policies: • Prohibiting the development or offering of policies which provide health care benefits which do the work of a medical scheme and so being contrary to the objectives and purpose of the Medical Schemes Act. • Health insurance products may not indemnify policyholders’ medical expenses. This refers to Gap Cover products which provide for cover against medical expense shortfalls. Although the First Draft Demarcation Regulations which were published aimed to ban Gap Cover policies, the second published Regulations approves of Gap Cover, but the proposal is for Gap Cover to provide a stated benefit which does not exceed R3,000 per day. Currently Gap Cover products cover the difference in cost between what the medical scheme has paid and what the specialist has charged while the insured was admitted to hospital. This proposed change will prevent the policyholder from insuring themselves against the actual cost difference of medical treatment which their medical scheme did not cover. This could result in consumers not being able to adequately protect themselves against out-of-pocket medical expenses which may lead to financial distress. • Products may not unfairly discriminate directly or indirectly against any person on any of the following or similar grounds: race, age, gender, marital status, ethnic

or social origin, sexual orientation, pregnancy, disability and state of health. This is in line with current medical scheme legislation. • The Second Draft Demarcation Regulations do however propose to reduce the 12-months condition specific waiting period to 6 months. Medical Schemes can apply a 12-months condition specific waiting period to protect the scheme against anti-selection. Reducing the 12-months condition specific waiting period to 6 months for health insurance products will impact on the financial sustainability of Health Insurance Products. This could be devastating as individuals who anti-select against health insurance products will have even quicker access to the full spectrum of benefits. • Policies must provide for an annual term and monthly premiums. This will prevent insurers cancelling a client’s policy within an annual term. The termination of the membership of a medical scheme is only allowed when requested by the member, non-payment of contributions and fraudulent activity compared to short-term insurance policies which could cancel your policy after a year. • Commission to be reduced from 20 percent to 3 percent of premium. Given the low unit cost of these products relative to medical scheme contributions, the average commissions earned on a Gap Cover Policy would be between R3 and R7 per month, which would not cover the costs incurred for providing the service that is expected by the client and which the advisor should provide. The proposed changes to the Second Draft Demarcation Regulations have resulted in a wide spectrum of comments from the stakeholders in the health care market. It is important to note that insurance products are designed around the financial needs of consumers. These financial needs are the results of a combination of unaffordable medical scheme contributions, tariff restrictions and specialists charging above these tariffs. Ideally these aspects should have been addressed before implementing the regulations so that the consumer is not exposed to excessive medical expenses and the level of additional cover required is more in-line with what is proposed in the regulations.

PAST INDUSTRY EVENTS

Moving forward

2014 FPI Professionals Convention

More than 1000 delegates and exhibitors from the financial services industry gathered from 25-26 June at the FPI Professionals Convention, sponsored by Discovery, to discuss ways to advance the profession.

he convention, themed ‘Growth through Innovation’ explored the role of technology in the financial planning sector and was aptly opened by Michael Jordaan, former FNB CEO – renowned for his role in innovation in the financial services sector. Following the convention, Godfrey Nti, CEO of the Financial Planning Institute (FPI) commented, “The objective of this event is twofold; firstly we want to improve the level of professionalism and positively

influence the quality of advice delivered by our professionals. Secondly, we use this opportunity to recognise and celebrate members who are advancing the profession through our various awards.” Similar to previous conventions, this year’s event brought together a high calibre of speakers which included Max Moyo, the wealth creation expert and human transformation coach, Toby Shapshak, technology commentator and editor of Stuff Magazine as well as Helen Nicholson,

founding member of the Professional Speakers Association of South Africa and director of The Networking Company, specialising in teaching people to master the art of networking by building the CFP® mark into their personal brand. International speakers included Sarah Harper, Oxford Professor of Gerontology and director of the Oxford Institute of Population Ageing, as well as Hal Ratner, global head of research at Morningstar IM (Chicago). This year’s convention allowed professionals

2014 FPI Financial Planner of the Year (left to right): Sankie Morata, FPI chairperson; runner-up Donovan Adams; winner Peter Hewett; Personal Finance editor Laura du Preez; second runner-up Bruce Fleming

to put themselves ahead of the financial services industry pack. The workshops and panel discussion sessions were on a variety of topics, including how to succeed in an ever-changing business world – with special focus on ways in which professionals can use technology to achieve specific business outcomes, tips and strategies on networking, reaching new markets as well as introducing and running mentorship programmes. In recognising and awarding excellence, Peter Hewett, CFP®, founder of Efficient Advise practice, was awarded the 2014 FPI Financial Planner of the Year title, and was joined in the awards ceremony by finalists Donovan Adams, CFP®, a retirement specialist at Chartered Wealth Solutions and Bruce Fleming, CFP®, executive head of private clients at Consolidated. Alan McCulloch, CFP®, was awarded the Harry Brews’ Award (previously Chairman’s Award). Principal Wealth Manager of

African interests, Gerald Mwandiambira, CFP®, was awarded the Media Award and Jacques Hodsdon, walked away with the Top Student in the CFP® Professional Competency Examination Award. “The success of the convention is an

indication that we are doing something right and I’m confident that future events will be just as successful. We will continue to partner with industry players to ensure that we create a platform for vibrant industry debates to encourage the progression of our profession,” concluded Nti.

PAST INDUSTRY EVENTS

Sisters doing it for themselves South African women in the financial planning industry are currently outnumbered by men by nearly 2000. One initiative to grow the number and professionalism of women in this industry is the Women in Finance Forum, founded by Kim Potgieter, CFPÂŽ, director at Chartered Wealth Solutions. Mandisa Magwaza, FPI value proposition consultant, attended a Women in Finance Forum event on 4 June at Chartered House in Dunkeld, and shares what she learned.

Why women? Women make great financial planners â&#x20AC;&#x201C; they are empathetic, understand the mandate to take care of others and their future wellbeing, and are dedicated to the profession.

A forum for women in financial planning The Women in Finance Forum was established in 2013, with the purpose of supporting, encouraging, mentoring and growing the professionalism and number of women in this industry. The forum hosts a Facebook page and

posts regular items of interest for women. There are two networking functions a year, and the most recent event, a dinner and presentation, featured Shireen Chengadu, executive director for leadership and dialogue at GIBS. Her advice on ways women can empower themselves in their profession was both inspiring and practical.

The voice of women Communicating in a way that commands authority and confidence, being conscious of breathing and tone of voice are all important points to remember when dealing with stressful situations and will influence how the speaker is regarded.

Your own best brand ambassador Be distinct or extinct! Because women are unique, Shireen advises that they should be credible, authentic and known for one distinctive area of strength, but also volunteer for stretch assignments to gain new knowledge, relationships and experiences, as well as become active in the media.

The art of negotiation View negotiation as problem solving, not a win-lose situation. The goal is to get a favourable deal.

Mentor and be mentored Mentor 1

Set initial expectations

Voice expectations

Plan a structured schedule

Commit to the schedule

Diagnose developmental gaps

Identify desired growth areas

Direct a developmental path

Emotionally bind to the path

Make time available

Commit to the time

Keep protégé focused on the vision

Trust the mentor’s vision

Be cognitively present in meetings

Monitor protégé progress

Complete the desired task

Manage protégé’s performance

Complete the desired task

Identify unrealistic expectations

Accept feedback

Motivate and encourage protégé

Ask for help and guidance

Have performance review times

Monitor own performance

Power, impact, influence L to R: Mandisa Magwaza, FPI Value Proposition Consultant, Shireen Chengadu, guest speaker and GIBS Executive Director for leadership and dialogue, Tsholofelo Dihutso, FPI Communications Specialist, Wende Davids, FPI Customer Experience Officer

“We need to acknowledge that, as women, we are facing the same challenges and we will only be able to combat these challenges when working together – we need to empower others. Transformation in leadership is women working together” - Graca Machel, Africa Forbes, September 2013.

Steps for a successful negotiation: • • • •

Assess Prepare Ask Package

Three questions to help prepare before entering a negotiation: Why are you asking? How are you asking? For whom are you asking? Also think about when – is the timing right for this negotiation? Observe and learn from successful negotiators.

Protégé

Competency is decided upon in a matter of seconds. Women should use the body language of power to shift the dynamics of a relationship – know when to be authoritative and when to be approachable. Use social media to voice to your views and never underestimate your influence.

How are we doing in South Africa? According to a Grant Thornton report, there has been little perceptible change in women holding senior positions in business across the globe – the percentage still sits at 24 percent. Grant Thornton Deputy CEO, Jeanette Hern, says that the “key to women empowerment lies in supporting other women” (Forbes Woman Africa). Mentoring in the business environment is vital: identify young women, professionals who are competent, and ensure they have appropriate mentors they can work with to achieve success. National Assembly approved the Women Empowerment and Gender Equality Bill, now it needs to be translated into a stronger inclusion of women in the workplace.

Develop your voice and use it consistently

Crucial conversations

In conclusion, Shireen challenged women to:

Keep educating and heighten the awareness of decision – makers on gender bias – it affects conversations (promotion, credibility, authenticity) and sets a higher bar for women. Develop general business acumen. Be brief – state your case and be done. Women should advocate themselves and other women.

• Take a stand on issues that affect them: sexual harassment, gender pay gap, violent abuse against women and children, and saying no when their well-being is affected. • Bring themselves to the tables of power and make their voice heard. • Be resilient.

• Sign up for life-long learning – remain relevant. • Leave your mark – be able to say: “I was here”. You plan for the well-being of your clients – what is the plan for your own well-being five, 10, 20 years from now? If you wish to receive notification of the next Women in Finance Forum event, contact Kim Forbes at kimF@charteredwealth.co.za. Visit the Women in Finance Forum Facebook page for thought-provoking reading.

Nurturing networks Different networks will nurture and increase the potential for professional success: • Network for managing family responsibilities. • Personal support networks – friends and colleagues. • Business network – not just one sector. • Digital network – a low-cost, effective channel to market products, services, oneself. Hone your networking skills: • Speak up in meetings. • Find a mentor and sponsor. • Participate in professional networking activities, and not just as an attendee. • Volunteer for high profile assignments – put yourself up for nomination for chair. • Build relationships not for outcomes/ benefits – it must be reciprocal. • Seek and provide information. • Be a door opener rather than a gatekeeper: let others in, make them feel comfortable.

PAST INDUSTRY EVENTS

Insurance Conference 2014 The 2014 Insurance Conference at Sun City lived up to the expectations of financial planners and advisors wishing to immerse themselves in the business of insurance.

he event highlighted the camaraderie and competitiveness of the industry, and emphasised that people, and relationships, are at the heart of the insurance business. While there are many challenges, in the form of regulation, soft markets, and skills shortages, the event left delegates inspired and positive about the work they do. Lloyd’s deputy chairman, Paul Jardine, said that he was astounded by the size of the conference and the friendliness of the people. There was much discussion about technology, mobility, connectivity, analytics and telematics, and the impact of big data on the insurance industry, but simultaneously, the constant reminder to stay focused on the basics of insurance. “This is a people business. It’s about long-term relationships and trust. We need to get back to the basics of insurance. Understand our clients businesses; have products that suit their needs

and transfer the risk to us; and partner with them for long-term relationships,” said Jardine. He emphasised that the insurance industry needs to sell the value of its product, and that this value is demonstrated through service. “It’s all about claims. It’s about how we pay claims, and how fast we pay them. If we do that, then people will believe that the promises we make are actually real.” Jardine noted that the world is becoming more complex and more uncertain, and the insurance industry must innovate, and provide true risk transfer. “Fair policies at fair prices, and when bad things happen to our clients, we have got to be there for them.” It was also often reiterated that technology does not replace the need for solid advice. Stephen Cross from Aon Global told conference goers that there is a need for personal advice to complement and supplement the data and analytics available,

and this is equally important. “The speed factor, the availability of information, the distribution of information, and the ability to analyse it, is changing the way we are doing things.” The risk of being disintermediated exists if someone finds a better way to do insurance broking, and if brokers are not able to see what their customers want, and how they want it delivered, they perhaps deserve to be disintermediated, suggested Cross. “We cannot live with legacy computer systems, and be continuously patching to the past, as opposed to building to the future. So you might say that legacy technology is a risk, but it is also an opportunity for someone – hopefully us,” he said. As an industry with its roots dating back over 326 years, in a London coffee shop, the need to keep up with, and ahead of the times is apparent. As Cross remarked: “We have got to start smelling the coffee as opposed to just drinking it.”

YOU ADHERE TO THE

HIGHEST STANDARDS,

YOU PUT YOUR CLIENTS

INTERESTS FIRST

YOU ARE AN ACCOmPLISHED CFP速

PROFESSIONAL

LET PEOPLE

KNOW

PRACTICE MANAGEMENT

Marketing

your practice in difficult times Gerald Mwandiambira, CFP®| 2014 FPI Media Award winner

The CFP® professional in South Africa faces several challenges. Despite growing widespread acceptance of the designation, the CFP® professional will face challenges in marketing themselves and their practices. With less than five percent of the registered financial services advisors carrying the designation, this makes it an even greater challenge when marketing a practice. In order to successfully market your CFP® professional practice, there are a few ways to promote your business.

Service proposition and positioning Marketing a professional practice or your skills is challenging with so many clients viewing the Financial Planning profession as generic. It is therefore imperative that as a CFP® professional, you have a clear and defined service proposition and positioning. Some practices prefer to position themselves as large groups of independent CFP® professionals with a common brand, whilst others have opted for FPI branded practices and even others prefer to position themselves as local businesses, akin to the neighbourhood GP, optometrist or legal practice. All of these approaches work, however it is important that your business is clearly positioned, as this will also drive the clients you acquire as well as inform your marketing strategy. Questions to ask yourself include ‘Why should a client choose you? What do you offer that is different?’ If your answer to the latter is ‘nothing’, then you need clearer positioning. Even something as unique as your personality can be a positioning

statement. If you are an extroverted and modern group of professionals, your positioning and service provisioning should show this. When hiring staff, ensure that they are a ‘cultural fit’ to your desired positioning.

as religious tithes, extended family financial commitments and other things that may be unique to your targeted client grouping.

Research and test your messages

Professional practices rarely succeed when they use mass media like radio or TV when targeting niche groupings. Rather choose relevant media to communicate, such as industry journals or even community papers. However, the best medium of all is face to face. As a CFP® professional go to the events of your target market clients, meet, greet and get your business card out there. And yes, until your practice is established, and referrals start, you need to be known and seen as much as possible.

Once you have settled on a positioning statement and service provision that suits your practice, you should ‘test’ it. Before spending thousands of rands on branding and stationary or even advertising, find a small sample of your target market and measure the response. Do not always take a proposal from a PR firm or ‘marketing guru’ as the be all and end all, test it! And insist on this as part of any contract if indeed you are using professional marketing experts.

The target market Even the best and most persuasive messaging will fail if in the wrong medium, sent to the wrong market or using the wrong media. Indeed, you should avoid having a ‘shotgun’ approach to attracting clients. Some of the best practices and CFP® professionals have thrived by having clearly defined markets. This can include faith-based clients such as in religious communities, language or cultural groupings, expatriates or targeting other professional groupings. Currently, many businesses are also targeting the ‘same sex’ married community due to their higher than average income segment. Avoid targeting generic group classifications like ‘black middle-class community’ or ‘high net worth individuals’ as within these groups, you can drill down further to specifics. You need to adapt templates and financial tools to meet client requirements. For certain groups, this may include cultural or social messages. This may be as simple as language adaptation or the addition of certain items into your FNA template, such

Media

Support these initiatives with a friendly, interesting and informative website. I often say that CFP® professionals can be seen as ‘financial doctors’, so try get this message to your clients that their life financial journey and health is your concern. Focus on emotive touch points such as this as opposed to marketing yourself and your practice as a centre of financial knowledge and product. Find innovative ways to connect emotionally with your clients.

Creative ways to connect with clients • Choose offices near your clients, this way you are never ‘out of their way’. If necessary and you need to be in the hustle and bustle of financial districts like Sandton, consider a satellite office near your market instead. • If you are targeting low to middleincome groupings, advertise something as simple as CFP® professionals being able to certify documents as ex-officio commissioners of oaths. If you are in a high foot-traffic location, this will bring people into your office, and often this may be the first step to engaging new clients. • Be highly visible in community nodes such as a school. Offer your practice as the official Financial Practice for a school, sponsor academic trophies or be involved in school activities. I would suggest, however, that you avoid your child’s school, although the temptation is great, this is a business marketing exercise separate to your parental

•

responsibility. Ensure that the school bursar for example has plenty of your cards for all parents, not just those struggling with fees. Other community nodes can be faith centres, social centres and just about any place people gather. Many company HR departments will gladly work with CFP ® professionals and practices if they avail themselves. For this purpose, target small to medium size businesses. Large businesses will probably not be as ‘friendly’ with such referrals for fear of alienating other relationships or to meet compliance requirements. Form professional closed webs, target a group of other professionals and offer a closed loop of referrals. You can work with lawyers, accountants, medical professionals and other service providers for referral networks. You can offer discounts to clients who remain in the network. The FPI offers many opportunities to do pro bono work. Despite earning Continuous Professional Development (CPD) points at these events, it is also an opportunity to meet and market yourself and your practice. Remember that your lead generation is not why you should accept the work, but rather after such events, you will get a few enquiries, especially if you acquit yourself well. Financial Education, such as the FPI MYMONEY123™ programme, is a great way to network, choose a group to educate. This can be a group of school children of any age or any organised group that can offer you the opportunity to speak. Remember to keep it simple as you are addressing beginners and not writing FBR714 for UFS!

PRACTICE MANAGEMENT

Good practice management and sales:

A continued tug of war

Almo Lubowski, CFP®| FPSA®

obody is under any illusion that a financial planning practice is in the business to be profitable and serve as a source of income for its owners and employees. However, it is unfortunate that many still overlook the need to engage in implementing some important practice management strategies for their businesses in favour of purely focusing on sales targets and production. These practice management strategies are too easily and too often overlooked because they do not directly relate to generating revenue or acquiring clients, at least not initially. Yet, they are an absolute necessity in building a foundation for a practice that wants to grow and thrive in the long term. Focusing too much on sales targets is a short-term strategy that often takes focus away from long-term sustainability of a practice.

So when talking about practice management strategies I thought of naming some examples:

their practices was necessary, and their value propositions needed adjustment.

• Creating a compelling vision and strategy for the practice’s future. • Defining a unique client value proposition. • Embracing and harnessing compliance requirements into useful business processes. • Ensuring client understanding of processes are enhanced rather than shortened in favour of new business • Developing more sustainable charging mechanisms for your practice. • Developing and valuing staff.

Independent research, canvassing the opinions of more than 200 advisors and conducted a year after the implementation of RDR revealed that 37 percent of advisors reported more profitable trading, compared to 23 percent who had actually seen a drop in profits. The survey was conducted by Opinium on behalf of Fidelity Worldwide Investment (Sample: 204 general IFAs surveyed between 29 November – 4 December 2013).

Those are just to mention a few, but I think you get the point of where I am going with this. Many recognise, when putting themselves in the shoes of a client, that these are necessary, but too many fall back into the sales production trap and find excuses to postpone formulating these strategies. Taking the time to do this however, has often proved to pay off in the long run. Unfortunately, many practices have been forced to look at their businesses due to regulatory changes that have gripped the world of financial services in recent years. An example of this was the Retail Distribution Review in the UK, or more commonly referred to as RDR. A similar regulatory change is on the cards for South Africa. Advice practices in the UK were forced to look at their client offerings and services in light of needing to justify charging a fee for these. Therefore, an evaluation of

It must be kept in mind that the research was done merely a year after the implementation of an extensive regulatory change and the practices that revealed a profit increase was still a relatively small percentage. It is, however, still a positive sign as these businesses had to change their approach at a rapid pace. Furthermore, an even lower percentage reported that the regulations had the opposite effect, which is also a good sign. However, one is left wondering what happened to the remaining 50 percent. So now imagine, what is possible with more time and no regulatory stick hanging over your practice? I believe if financial planning practices take this approach, and takes time out on practice management issues, they will find there will be much less need to focus on sales, provided the right practice management strategy is in place for their firms, as client numbers will increase and will be retained for much longer.

Being financially fit and proper–

what is required B

y now, all prudent financial service providers (FSPs) are aware that the Financial Services Board requires them to be financially sound and hold reserves at all times. However, as with many things, the devil is in the detail, and FSPs should be aware of the compulsory requirements expected of them. These are contained in Board Notices 106 of 2008 and 202 of 2012, and therefore, FSPs risk suspension if their balance sheets don’t stand up to scrutiny. Solvency can be a real problem for some FSPs, explains Gerry Grispos, compliance officer at Compli-Serve. At times some FSPs confuse being financially sound in accounting terms, with being financially sound according to the Board Notices. All FSPs need a strong balance sheet, according to their FAIS Category. The assets of all Category 1 FSPs must exceed their liabilities. In the case of Category 1 FSPs that hold client funds, the board notices specify that their assets must exceed their liabilities and they must hold in cash, four weeks of annual expenditure. This may exclude directors’ emoluments and profit shares. Unfortunately, there is no clear definition of assets and liabilities.

The notices do specify that assets may not include goodwill, intangible assets or investments or loans in related parties. The required reserves must be held in cash that can be liquidated within a short period of time without incurring a loss, and must be kept in a separate bank account. On the liability side, if any of the shareholders have lent money to the company they would need to sign an agreement subordinating the loan if liabilities exceed assets. In other words, they have to agree, in writing, that in the event of insolvency, they will be paid last, after all other creditors. Total assets of Category 2 FSPs must exceed their liabilities and their current assets must exceed their current liabilities. Their reserves must amount to eight weeks of operating expenses, whether or not they hold client cash. Category 2A FSPs (those that operate hedge funds) have even more stringent requirements. They have to hold assets of at least R3 million above their liabilities and of that, 13 weeks’ worth of operating costs must be in cash. All the other rules also apply.

To avoid issues arising with the regulator, FSPs, irrespective of their category, should review the facts of their true financial position each month, and to have directors sign off on their balance sheets. If an FSP sees a problem developing, the best course of action is to alert the regulator up front, and be completely transparent. The regulator is usually prepared to give some leeway if approached this way, although this is not guaranteed. One of the problems is the fact that most compliance officers are not accountants and lack the skills to fully interrogate the financials FSPs present to them. Compliance officers should read all the notes to the financials, and read the directors’ and auditors’ reports. If an auditor says that the financials are not a ‘fair’ representation of the company’s financial position, this is a red flag. To avoid unnecessary complications, FSPs must follow the board notices and keep their house in order.

PRACTICE MANAGEMENT

PLANNING FOR

PLAN-B By Luka Vracar

As a financial planner, disaster recovery may not be your core competency, but how do you continue operating your business if your office burns down?

disaster recovery plan ensures that your data is backed up and available in the case of a business interruption, and there are numerous options for South African companies. With the risk of fire, water damage, load shedding, and even recent strike action, all able to disrupt business, can you afford not to be covered?

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South African companies spend on average 10 per cent of their annual IT budget on IT backup and recovery. However, local recovery of data, preventing loss during business interruption, is not as effective as it should be, with 74 percent of local companies not confident that they can fully recover from a disaster. This is according to a 2013 survey by EMC, which spoke to 250 local IT decision-makers. “Disaster recovery is like a medical aid. You can insure a business for a certain amount of revenue loss or profit loss, but the company will get paid out financially. The problem is that the company needs to continue operations, and certain things cannot be bought in short periods of time,” says Greg Comline, general manager of Global Continuity South Africa. 52 percent of respondents to the survey indicated their companies had suffered from lost data and systems downtime in the last year, and 38 percent reported a loss of revenue as a business consequence. Interestingly, the same amount (39 percent) increased their backup and data recovery spending after a significant disruption. However, if companies have the adequate foresight to backup their data and further install a bespoke recovery plan, the loss could be mitigated. “The results of the survey demonstrates a real need to rethink approaches to backup and recovery across South Africa. Increasingly, electronic information and the systems associated with that data are key assets to the health and success of most organisations, yet this survey shows that many are not fully prepared to recover either their systems or data in the event of an IT failure or a more extreme situation,” says Servaas Venter, country manager of EMC Southern Africa.

Back it up There are a number of ways that a company can back up its data. The most common method, and the oldest, is writing data on tape drives. Recently though, replication of data from an in-house server to an offsite one through cloud-based computing has become the most important way to ensure data is available complete and quickly, should a disaster befall a company. Also, restoring from a disk drive is much faster. >>

PRACTICE MANAGEMENT

Currently, 44 percent of companies are using backup tape drives for recovery in the case of disaster. This is problematic as tapes are largely considered to be outdated and costly. A move to online and disk-based storage is forthcoming, and 82 percent of respondents to the survey agreed that there should be a move beyond tape drives. Tape drives are a way for businesses to backup large amounts of data and send it to an offsite location to ensure the safety of the data. The problem with tape drives, where data is recorded on magnetic strips, is that while it can store large amounts of data, it provides sequential access, which means that the tape needs to be physically wound to find the correct data, unlike a disk drive which can access data randomly. This means that data recovery is slow. Tape drives also contain parts and are fragile and are also susceptible to the same risks such as fire, damage or theft. “At the moment, South Africa is in a migration stage. Clients have been using tape to back up their systems not only for archiving but also for restoring purposes, and what we are seeing with the expansion of data is that the limits of tape are being pushed for the store and restore component of it. So we are seeing far more clients moving to either online or server backups. We have certainly seen an increased appetite of clients using cloud based services,” says Comline. However, Comline goes on to say that tapes are still probably the most economically sound and reliable way to archive data if a client needs to keep the information for many years. "So on one extreme you have tape and the other extreme you have disk-based backup or server backup. The big driver for business is how quickly you want to recover your business, so that is where we look at your recovery time objectives. If you need to recover your business within four hours, it means that you will probably need to use disk.

If you need your business to be available within 10 to 15 minutes, you probably need to use a combination of replication, where you have a site that you can bring up very quickly, and some backup so that you can recover from any data corruption that you might have," says Comline.

Offsite Disaster recovery companies typically have facilities that are powered up 24/7 with workstations, and all of the systems, applications, and data the client needs to do business. Disaster Risk South Africa (DRSA), which claims to operate a leading data recovery facility in the world in Midrand, explains that it is possible to continue business operations even after a complete loss, if one is prepared. “In December last year, one of our clients’ premises burnt down. A light cable sparked and caught fire, and the building was destroyed. The client declared a disaster. They had seats and servers with us, and were quickly up and running again” says Roelien Jansen van Vuuren of Disaster Recovery South Africa. In this case, the client had live backup servers, and within two hours DRSA was able to have everything set up, and the client could carry on working when they got to DRSA’s premises. Global Continuity SA had a similar example where a client had invoked their DR plan after a fire. The following working day they were able to set up their business at Global Continuity’s facilities and continue their operation. Global Continuity South Africa also provides mobile disaster recovery, which does not include relocating staff and equipment to a recovery facility. Instead, while the clients own hardware is being repaired or replaced under the relative insurance policy, mobile recovery delivers equipment to the client in the shortest time possible. “If a client has a server that has failed for whatever reason, we have got the backup servers available, and if the client does not

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have localised backups at their site, we will take the backups we have of their data, restore it onto a server for them, and deliver it to them. They can then run that server in their server room for however long they need to. It is a fast solution that mitigates the risk of having to quickly sort out new servers and restore the backups,” explains Comline. It is also possible to restore a company’s server environment at the disaster recovery facility. Chances are that the facility will be connected to the client’s network, and the client will be able to access all of the functionality of the backup server through the internet. This allows companies like Global Continuity to provide servers anywhere within national reach.

Risks Extreme situations, such as natural disasters, fires, and water damage are uncommon when compared to the regular IT downtime, brought on by mundane software and hardware malfunction. The loss of power is the biggest culprit for disruption, responsible for the loss of data 56 percent of the time. Companies do not need to protect themselves against the unexpected or the extraordinary. Instead, organisations are suffering from the impact of routine downtime, and even malicious activity. Load shedding is a good example of a business interruption which has companies invoking their disaster recovery plans. Comline indicates that load shedding is also introducing other complications such as increased issues around equipment failing because of power spikes, and an increase in the risk of fire. “The other issue is during strike action: not being able to access your facilities. Especially in some of the Rosebank areas where we had recent strikes, we have seen an increased number of clients not being able to access their sites and data. And when it comes to strike action, we have also seen increased complications when people have to make use of a ghost workforce,” says Comline.

A disaster recovery plan requires regular testing and auditing, and it would not do any good if it is outdated. Jansen van Vuuren recommends that a company revisits their contracts and backup systems each year and test their disaster recovery plan and their strategy at least twice a year, to ensure it is current and reliable. It is important for clients to think of the end stage. A company should also maintain detailed records of their employees, hardware, software, and their network equipment. Comline indicates that South African companies are slowly putting more resilient systems in place, and this is decreasing the number of seats that a client requires at a disaster recovery facility. “In the event of a disaster, the company wants to be able to say to the press or to any stakeholders that their systems were recovered after a business interruption took place and that the company was able to invoke a tested business recovery plan. Those are the kinds of things that loan confidence to the business. We have seen examples in Europe, whereby clients who have been able to offer a statement like that had an increase in their share price, rather than taking a knock,” concludes Comline. The fact that South African companies are increasing spending only after experiencing a business interruption is alarming, since data is a critical and growing company asset. The use of data is growing exponentially. Insurance over the traditional brick and mortar operations of a business is not expansive enough to ensure adequate business continuity after a significant interruption brought on by disaster because financial compensation does not enable timely business continuity as the data remains lost. Companies need to be advised that disaster recovery is, therefore, fundamental as a key business driver.

regulation

South African financial planning:

abreast of the best Financial planning sector in SA no slouch

Cameron Wood, Wealth Management Business Owner of IRESS South Africa

No matter where in the world you are, effective wealth management requires the right tools and an understanding of the challenges specific to your clients and the regulatory environment. Does South Africa compare to the international landscape and what tools do we have in place to anticipate regulatory changes? Cameron Wood, wealth management business owner of IRESS South Africa, suggests we do.

eing an international financial planning and wealth management software solutions provider, IRESS’ experience is that South Africa is on par with international markets such as the UK, Australia, New Zealand, and Canada. “This puts South African financial planners in an advantageous position,” says Wood, “because the tools available to them preempt the regulatory changes South Africa is likely to experience in future.” As our legislation is amended to reflect international trends, financial planners are already well positioned to adapt to the changes and manage their clients’ portfolios with confidence in the software on which they rely.

Legislation by design South Africa has the advantage of having learned from other regions when it comes to legislation governing the financial sector. The result is a balanced view of financial regulation adapted from the best of the UK and Australia’s regulation. One example of this in action is how the Financial Services Board (FSB) oversaw the implementation of legislation that to some extent insulated the country from the worst of the 2008 global financial crisis, which hit regions like the US – with its lax loan policies – so hard. The regulator continues to watch international trends closely and to plan for any gaps in the regulatory regime that may need to be plugged for the good of the economy

and consumers. Unlike financial services providers in many other regions, South African financial planners have to disclose their fees upfront. “This client-centric approach requires financial planners and other investment professionals to demonstrate the ‘value’ of their advice. This means it’s vital for industry professionals to use technology to substantiate the advice they offer their clients.” says Wood. As well as the need to continually demonstrate this value and potentially on an annual basis, there are additional steps in the advice process adding to the cost of providing advice and potentially to the cost to the consumer. To retain profitability, a financial planning

business will need to look for efficient ways of providing cost-effective advice and reduce the impact on the bottom line while meeting their compliance requirements. Internationally, Australia’s Future of Financial Advice (FOFA) legislation – first passed in June 2012 – is intended to improve the trust and confidence of Australian consumers in the financial services sector and enables them to compare the quality of service they receive and the fees they pay meaningfully. FOFA also seeks to ensure that all Australians have access to high quality financial advice at a reasonable fee. The UK, meanwhile, has arguably become far more bureaucratic than either Australia or South Africa when it comes to financial sector regulation. Last year saw the introduction of Retail Mediation Activities Return (RMAR) regulations that require consumers to report the fees they’ve paid for advice or other financial services to the Financial Conduct Authority. Regardless of the region, oversight of financial planning in the name of consumer protection is becoming increasingly common globally. Across regions the legislative reviews have been driven by consumer complaints or economic crisis where the consumer is sold products that may not be suited to their personal circumstances, and whom later complain. “This makes it extremely challenging to supervise or monitor every service provider. Regulators, in turn, tend to respond with policy, forcing overarching change that results in vertical integration of distribution channels and the need to avoid conflicts between products and advice,” adds Wood. As a result, what financial planners need, irrespective of region, are solutions that are scalable and which can be used by anyone, from a sole financial services professional to a large corporate enterprise, and which ensure standardisation, compliance and accountability to the national regulator.

Retirement One area where South Africa does fare worse than the likes of Australia and the UK is retirement funding. In Australia, superannuation funds have been the norm for many years, ensuring that consumers and their employers contribute to retirement planning. While this is very similar to South Africa’s pension and provident funds, the uptake in South Africa is comparatively feeble, largely due to the substantial wealth disparities in South African society compared to that of its antipodean counterpart. Australian employers must contribute to superannuation funds and employees can opt to add to them (up to certain caps)

in exchange for tax deductions. Because these funds are so commonplace in the country, another spinoff is a higher level of consumer education when it comes to retirement funding specifically and investment generally. The UK, meanwhile, has made it compulsory for employers and employees to contribute to the National Insurance fund. In the case of both Australia and the UK, this effectively amounts to the regulator stepping in and taking over when it comes to financial advice by deeming its blanket policies superior to most consumers’ decisions if left to their own devices or the unscrupulous in the financial services sector. In these regions, government wants to divorce advice from product, which results in inevitable inefficiency in the process. However, given the growing pressure on these welfare states it’s not surprising. These governments cannot afford to fund the growing number of people in retirement – many of whom are also living longer – and so they need to force employers to contribute while simultaneously coaxing consumers to bolster these funds themselves. One thing is common to all regions: consumers need advice and governments need to empower their citizens to make their own retirement funding decisions while also self-funding through sound financial decision-making. At the same time, consumers are increasingly demanding access to their own information, driven in large part by mobile technology. Wood adds, “Consumers also expect greater engagement today, and those financial planners that can involve consumers in their planning for their own financial futures can expect to charge reasonable fees”. Wood explains that industry professionals require tools that cater for the growing demand that consumers have around transparency and client online access.

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Solutions that can report investment portfolios in multiple currencies, which is particularly useful for nations with highly mobile citizens like South Africa where many consumers hold investments abroad, whether for the sake of diversity or because they’ve worked in multiple regions during their careers, are essential. As globalisation continues and regulation evolves, financial advisors around the world will increasingly need digital tools that are designed with a combination of global knowledge and local experience. It seems clear that South Africa is well positioned to achieve compliance with local regulation while seamlessly plugging into international trends.

Altrisk is a division of Hollard Life Assurance, an authorised financial services provider (FSP 17697).

TAX PLANNING

Nowhere to hide

changes to tax agreements to permit the collection of tax

Jeffrey Wiseman | Head of Fiduciary Services at Momentum Wealth

That the courts of one country will not enforce the revenue laws of another country has been a long-established and widely applied legal principle. However, increased cooperation between governments means that this once wellestablished principle is now not as robust as it once may have been.

n the drive to combat international tax evasion and other forms of tax non-compliance, the Organisation for Economic Co-operation and Development (OECD) has embarked on a programme contained in the Multilateral Convention on Mutual Administrative Tax Assistance in Tax Matters, which was entered into between the OECD and the Council of Europe in 1988. The Convention was amended by a Protocol in 2010 and the amended Convention now includes provisions that deal with the exchange of information on request, assistance in the recovery of taxes, the service of documents and the facilitation of joint audits. The effect of the changing landscape can be

seen in two recent cases involving the South African Revenue Service. In the first of these, the 2013 case of Ben Nevis Holdings Limited and Another v HM Revenue & Customs (HMRC), the English Court of Appeal came to the assistance of the South African Revenue Service and applied provisions of the Tax Convention between South Africa and the UK for HMRC to apply to court on behalf of SARS to recover taxes owed to SARS. In the second case, that of CSARS v Mark Krok and Another (Unreported, Case Number 1319/13), the North Gauteng High Court of South Africa granted a preservation order against Mr Krok’s South African assets to secure the payment of taxes owed to the Australian Commissioner of Taxation.

aspect of the judgment deals with an estate planning structure established by Mr Krok and apparent inconsistencies that existed between the form of the structure and the way that Mr Krok behaved in relation to it.

The application was brought in terms of provisions of The Tax Administration Act 28 of 2011 and, although much of the judgment in CSARS v Krok deals with the practical application of the amended to the Double Taxation Agreement between South Africa and Australia, a very interesting

1. It confirms the co-operation between countries in the sharing of tax information and the assistance that they are prepared to offer one another in the prevention of tax evasion; and 2. The facts giving rise to the particular tax liability involved a complex offshore structure that Mr Krok had established. The court was called upon to evaluate Mr Krok’s behaviour in relation to the structure and to decide whether agreements that he had entered into with a company forming part of the structure for the disposal of his rights to his South African assets had resulted in him, in fact, disposing of his rights to the particular assets.

The facts of the Krok matter were that Mr Krok owed the Australian Commissioner of Taxation an amount of A$ 25,361,875.79 plus interest. The Australian Tax Office issued a certificate confirming the amount due to it and this was held to be enforceable in terms of the new South African legislation for purposes of obtaining the preservation order. From an estate planning point of view, the case is interesting in the following two respects:

The Double Taxation Agreement between South Africa and Australia, entered into in 1999 for the avoidance of double taxation and the prevention of fiscal evasion, contained no provision for mutual assistance in respect of taxes on income. This was amended in 2008 when provisions for the assistance in the collection of taxes were introduced. In order to assist the Australian Tax Office, CSARS sought to rely on these provisions to request the court to make an order in relation to assets situated in South Africa that it alleged to belonged to Mr Krok. The respondents argued that the assets forming the subject matter of the application no longer belonged to Mr Krok, but had been transferred to a BVI company, Jucool Enterprises Inc. (Jucool) by way of Income and Asset Sale Agreements entered into between Mr Krok and Jucool. It was argued that, in terms of these agreements Jucool was the ‘beneficial owner’ of the assets. The assigned assets originally formed part

of Mr Krok’s assets that were ‘blocked’ in South Africa under South African Exchange Control Regulations when Mr Krok emigrated from South Africa. The view of the Australian Tax Office was that the assignment of the assets was not legally effective and/or was a sham. On analysis of the facts, the court was presented with evidence that Mr Krok, himself, applied to the South African Reserve Bank on numerous occasions for the ‘blocked’ funds to be released. He had also formalised his emigration facilities with the Reserve Bank on the basis that he was legally and beneficially the owner of the rights and interest to the South African assets. The Reserve Bank had not granted any exemption to remit capital or income to Jucool under their purported agreement. In all dealings with the Reserve Bank, Mr Krok maintained that the assets were legally and beneficially his and that the income earned on those amounts was his. He had successfully applied for the release of certain of these funds to pay certain expenses and had, on other occasions, successfully remitted funds purportedly subject to the assignment arrangement to his personal accounts abroad. Jucool was unable to show that it was the so-called beneficial owner of the assets. In the circumstances the court found that Mr Krok had not intended to immediately transfer any rights to Jucool and that he was therefore the beneficial owner of the assets. In the result, the court came to the assistance of the Australian Tax Office and granted the preservation order in respect of the assets. Both the Krok and Ben Nevis cases are clear examples of an increasing trend between governments to work together to combat tax evasion. As a result, the notion that assets held abroad are out of reach of the tax authorities is not absolute, and the circumstances under which countries will co-operate continue to increase as they enter into international agreements in this regard. It also demonstrates the importance of giving full effect to agreements entered into when implementing structures and that the failure to do so is likely to result in the courts to disregarding such arrangements.

trusts

Trusts not recognised in Lesley Maman, FISA member and Partner of Maman Attorneys

Trusts are often created to consolidate and protect assets for tax purposes and estate planning. In the case of a minor or an incapacitated adult, trusts are used as a vehicle to protect their assets and ensure they are provided for.

some countries ‘I bequeath my estate to the testamentary trust…’ The issue of trust recognition is a conflict of law problem. In relation to immovable property, common law and civil law interpret ownership rights in different ways. Under common law, immovable property has legal and equitable rights.

trangely, many Europeans are unaware of the concept of a trust, and, in many countries, trusts do not exist and are not recognised as a special vehicle for holding assets or diluting tax. South Africa and the United Kingdom operate under ‘common law’, but most European countries operate under ‘civil law’ derived from Napoleonic law. Civil law is codified based on Roman law and the Napoleonic Codes, and common law is based on English common law. While common law changes through judgments, precedents and legislation, civil law is codified and only changes through legislation. This brief explanation shows how issues arise in different jurisdictions by a simple line inserted in a will without considering the consequences:

Civil law however has only the legal rights relevant in civil law countries in which ownership and possession are the central concepts around which immovable property revolves. While trusts are predominant in common law countries, the blunt assertion that the trust is alien to civil law will not withstand scrutiny any longer. Some European civil law countries (including Switzerland) have signed the Hague Convention – the Recognition of Trusts, 1985, thus recognising the trust as part of its tax law and drawing a distinction between resident and non-resident actors. Some other European countries have created a similar entity to the trust and have adopted the concept into their civil law codes. Israel, for example, recognises the benefits of trusts and it is most advantageous to foreign beneficiaries, particularly in regard to tax consequences, Its primary requirement is that the trustees be Israeli.

Other countries to adopt the Hague Convention include Italy and France. Greece, however, is not a party to the Hague Convention and nor is the Netherlands. Problems arise when a civil law jurisdiction is faced with a common law trust. The common law perspective views the trust as an entity created for beneficiaries and the preservation and protection of their equitable rights. In a civil law system, the most important question in inheritance cases is ‘who inherits what ?’ Taking the example of Greece, a trust, as a separate legal entity, is viewed with confusion or suspicion and even as a ‘specialised foreign will, capable of taking control of your right to an inheritance’. Here trusts normally appear only as a result of the bequest being contained within a ‘foreign’ testamentary trust or in a will nominating an inter vivos or existing trust as the sole beneficiary. Notwithstanding the failure to take any precaution to protect assets in Greece when drawing a South African will, the will must be registered with the relevant Greek probate authorities. However, if the will has a testamentary trust as the named beneficiary of immovable property, the debate becomes very intriguing. >>

trusts

In Greece, beneficiaries to any asset in a deceased estate must ‘accept’ their inheritance in writing through the Greek Probate Court. Once the will is registered, the named heirs follow a series of legal steps to be acknowledged as such. In some cases, named heirs become embroiled in court proceedings to be recognised. The Greek Probate Court, its administrators, and officials and the Tax Department, will look only to the foreign will if that is the one presented to them to determine who the heirs to the estate are. When they interpret a clause which indicates the beneficiary is a trust or some similar form of devolution to an inter vivos trust, material problems quickly arise as the trust is not considered as a legal ‘entity’ or ‘person’. Both testamentary and inter vivos trusts have no locus standi in Greece. As the Probate Court in Greece will look to the trust as the named heir, but not recognise the trust as a legal entity, the situation is frozen and

finalisation of the estate delayed indefinitely. The trust is viewed by the Probate Court in Greece as a peculiar ‘special purpose vehicle’ to becoming an heir or as another form of will and devolution which foreigners are eager to apply to escape tax consequences. The trust is viewed as the instrument of acceptance or the means to inherit, rather than an entity that accepts, on trust, the assets to be held for the class of beneficiaries contained in its constitution. This being the case, the trust in Greece, cannot inherit, be a party to in any trial or court proceedings, or have any tax identification. Since the trust and its representatives are not recognised in Greek law this means if there is immovable property in Greece placed in a foreign trust (created, for example, in a will) the immovable property is locked in an almost impenetrable non-existent entity. This non-existent entity is unable to follow the legal procedures necessary under the civil law applied in Greece, thereby severing right title and interest to the immovable property. Unfortunately, many people who currently have their Greek immovable property bequeathed in their will or already in a foreign trust may not have been informed that Greek law does

not recognise trusts. Therefore, any immovable property placed into the trust could damage the right, title and interest of the ultimate beneficiary. The trust severs the title to the land and devalues the property the settlor was attempting to protect for his beneficiaries. Attorneys may not consider they could be harming their clients by including their client’s Greek immovable property in a testamentary or inter vivos trust. If the country where it is being filed does not recognise the trust entity, the controlling law will have little effect. Property owned in Greece should be excluded from any trust. Define immovable property in Greece separately to secure the right, title and interest in it so beneficiaries are saved huge legal fees trying to free property from an unrecognised trust through multiple applications to courts in Greece and similarly in other countries in Europe where trusts are not recognised. In conclusion, there is a great advice risk attached to the assumption that all legal entities are accepted and recognised in all countries. Once a testamentary trust is filed with the court where trusts are not recognised, it may take a long time to resolve and only on the rare occasion with experienced counsel may it be successfully challenged through careful examination of the constitution of the trust.

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When you qualify as a professional, you qualify for a share in our profits.

With a 4-year degree or equivalent qualification, you can become a member of PPS, the only financial services company created by professionals, for professionals, and completely owned by its members. Apart from insurance, investment and healthcare solutions tailor-made to your specific needs as a professional, as a valued PPS member you also share all the company’s profits* – which were upwards of R4.2 billion last year alone. We’re professionals, just like you.

For more info, SMS ‘SACF’ and your name to 42097, consult a PPS product-accredited financial services adviser or visit www.pps.co.za.

The key To success lies in sharing iT.

PPS offers unique financial solutions to select graduate professionals with a 4-year degree. PPS is an authorised Financial Services Provider. *Members with qualifying products share all our profits. Standard SMS rates apply.